Leather and Leather Products Report

Product Report
LEATHER AND LEATHER PRODUCTS
AHMAD KHAN RESEARCH ASSOCIATE
Trade Development Authority of Pakistan

Executive Summary
The leather industry of Pakistan is one of the export-oriented industries. It is second to the textile
industry in terms of export earnings in the economy. The leather sector exports have contributed
4.14 % to the total exports of the country with an exported value of USD 1,067.12 million for the
year 2017. However, the exports recede by 3.22 percent in 2017 over the year. This study has
analyzed Pakistan’s leather exports and global leather imports trend both at HS 2-digit and HS 6-
digit to gauge prospects and opportunities to promote exports amidst of current challenges faced
by the industry domestically as well as at the export front.
The analysis employs two tier strategy to identify potential leather exports of Pakistan followed
by identification of potential market for the identified potential exports. As a result, articles of
apparel of leather or composition of leather- 420310, grain splits leather "incl. parchment-dressed
leather", of the whole hides and skins of bovine – 410712, and footwear with outer soles of rubber,
plastics or composition leather, with uppers of leather – 640399 are identified as the potential
exports. While USA, France, Germany, Italy, and China are found to be the potential markets for
the identified potential products and Pakistan faces competition in these markets from India, China,
Vietnam and Italy. Moreover, it is also noted that the major exports of Pakistan at HS 6-digit are
the one which are least imported globally.
For the identified potential exports, a comparative analysis is carried out with respect to Pakistan’s
competitors in the potential markets on the basis of unit price, export share, export promotion
strategies, tariff, and non-tariff barriers.
Based on the analysis, this study recommends Pakistan to diversify its leather exports basket by
promoting exports of sports footwear - 640411, hand bags - 420221, footwear with outer soles of
textile materials-640419, and trunks, suitcases, vanity cases-420212 as these products have major
share in the global leather imports. Moreover, tanneries need to be technologically upgraded with
Combined Effluent Treatment Plants (CETPs) to limit environmental degradation and to acquire
membership and certification from international accredited agencies in the leather sector.
Furthermore, Pakistan needs to catch up with global trends in the sector where demand has shifted
to PU leather and Pakistan exports a negligible value of it. Finally, to maintain price
competitiveness in the global market, Pakistan should rationalize custom duty on raw materials for
leather industry including organic surface- active agents – chapter 34, chemicals under – chapter
38, and tanning or dyeing extracts under – chapter 32.
Acronyms
AAGR Average Annual Growth Rate

ASEAN Association of East Asian Nations
CETPs Common Effluent Treatment Plants
CITES Convention on International Trade in Endangered Species
CLIA China Leather Industry Association
DFIS Duty Free Import Scheme
EU European Union
FDI Foreign Direct Investment
FDDI Footwear Design & Development Institutes
FOB Free On Board
FTAs Free Trade Agreements
HS Harmonized System
ICEC Institute of Quality Certification
ILDP Leather Development Programme
IDLS Integrated Development of Leather Sector
LPDI Karachi and Leather Products Development Institute
LWG Leather Working Group
MMSEs Micro, Medium and Small Enterprises
MLFAC Mega Leather, Footwear and Accessories Cluster
NILT National Institute of Leather Technology
PBS Pakistan Bureau of Statistics
PFMA Pakistan Footwear Manufacturing Association
PLGMEA Pakistan Leather Garments Manufacturers & Exporters Association
PTA Pakistan Tanners Association
SBP State Bank of Pakistan
SRO Statutory Regulatory Order
TPP Trans-Pacific Partnership
UNIDO United Nations Industrial Development Organization
List of Tables
Table 1. Pakistan Leather Industry - Production ............................................................................ 2

Table 2. Potential Leather Exports of Pakistan- HS 6-Digit ......................................................... 13
Table 3. Potential Markets and Competitors for 420310 .............................................................. 14
Table 4. Tariff and Unit Price for 420310 .................................................................................... 14
Table 9. Top Global Leather Exports at HS 6-Digits ................................................................... 20
Table 10. Synthetic Leather Pakistan-World Trade Trend ........................................................... 23
Table 11. Production of Hides & Skin .......................................................................................... 34
Table 12. Input Cost in Leather Industry- A Comparison of Pakistan, India, & Bangladesh ...... 37
Table 13. Import Tariffs -Tanning or dyeing extracts- Chapter-32 .............................................. 38
Table 14. Import Tariffs -Chemicals; Chapter-38 ........................................................................ 38
Table 15. Import Tariff-Organic Surface- Active Agents (3402) ................................................ 38
Table 16. Pakistan's Top Leather Exports .................................................................................... 49
Table 17. World Top Leather Exports .......................................................................................... 50
Table 18. Major World Imports- Synthetic Leather ..................................................................... 51
Table 19. Synthetic Leather Exports at HS 6-Digit-Pakistan ....................................................... 52
List of Figures
Figure 1. Leather Industry Cluster Locations- Number of Registered Units .................................. 2

Figure 2. Leather Sector Exports of Pakistan ................................................................................. 5
Figure 3. Pakistan Leather Export Composition-2017 ................................................................... 6
Figure 4. Average Annual Growth Rate (AAGR) for Pakistan's Leather Exports-2013-2017 ...... 6
Figure 5. Share in Pakistan's leather Export and in Global Leather Imports .................................. 8
Figure 6. Pakistan -World Trade Complimentary-Leather Exports.............................................. 10
Figure 7. Average Annual Growth Rate (AAGR) at 6-Digit-(2013-2017) .................................. 11
Figure 8. Top Destinations for Pakistan's Leather Exports .......................................................... 12
Figure 9. World Leather Import Composition-2017 ..................................................................... 17
Figure 10. Average Annual Growth Rate for World Leather Imports-(2013-2017) .................... 18
Figure 11. Top Global Importers of Leather and Leather Products .............................................. 18
Figure 12. Top Global Exporters of Leather and Leather Products .............................................. 19
Figure 13. World Trend Matrix for Leather Export-2017 ............................................................ 22
Figure 14. An Elementary Form of Value Chain Process ............................................................ 33
Figure 15. Value Chain Process Map-Leather & Leather Products.............................................. 35
Figure 17. LWG Membership-Regional Comparison .................................................................. 39
Figure 18. Regulatory Duty on Leather Industry Inputs and Finished Products .......................... 41
Figure 19. Drawback Rates of Leather Products .......................................................................... 41
Figure 20. TDAP’s International Trade-Fairs-2019-Leather & Leather Products ....................... 42
Figure 21. TDAP International Trade-Fairs-2019-Leather-Allocated to PTA ............................. 42
Table of Contents
Executive Summary
Acronyms
List of Tables
List of Figures
1. Pakistan Leather Industry: An Overview ................................................................................ 1
2. Leather and Leather products’ Description ............................................................................. 3
3. Export Overview Pakistan’s Leather Sector ............................................................................ 4
4. Pakistan’s Leather Export Composition at HS Code 2-Digit .................................................. 5
5. Pakistan’s Top Leather Exports- HS Code 6-Digit ................................................................. 7
6. Pakistan’s Top Export Destinations for Leather and Leather Products................................. 11
7. Potential Products, Potential Markets’ Identification and Analysis ...................................... 12
7.1. Pakistan’s Potential Exports in the Leather Sector ........................................................ 13
7.1.1. Potential Markets for Export of Articles of Apparel of Leather or composition of

Leather- 420310 ..................................................................................................................... 13
7.1.2. Potential Markets for Export of Grain splits leather "incl. parchment-dressed
leather", of the whole hides and skins of bovine - 410712 .................................................... 15
7.1.3. Potential Markets for Export of Footwear with outer soles of rubber, plastics or
composition leather, with uppers of leather - 640399 ........................................................... 15
8. Global Leather Trade Scenario .............................................................................................. 16
9.1. Global Top Importers of Leather Products ........................................................................ 18
9.2. Global Top Exporters of Leather Products ........................................................................ 19
9.3. Global Trend of Leather Exports at HS 6-Digit ................................................................. 19
9.4. Global Trade Trend for Synthetic Leather ......................................................................... 22
9. Competitors’ Export Strategies ............................................................................................. 24
9.1. Italy’s Strategy ............................................................................................................... 24
9.2. India’s Strategy .............................................................................................................. 26

9.3. China’s Strategy ............................................................................................................. 28
9.4. Vietnam’s Strategy ......................................................................................................... 29
10. Non-Tariff Barriers ............................................................................................................ 30
10.1. Certifications .............................................................................................................. 30
10.1.1. OEKO-TEX Leather Standard ................................................................................ 30
10.1.2. Leather Working Group (LWG) Registration......................................................... 31
10.1.3. Eco-Labelling .......................................................................................................... 31
10.2. Chemical Requirements .............................................................................................. 31
10.3. Convention on International Trade in Endangered Species (CITES) ......................... 32
10.4. Other Requirements .................................................................................................... 32
11. Value Chain Analysis for Leather and Leather Products................................................... 32
11.1. Stage 1: Hide Supply .................................................................................................. 33
11.2. Stage 2: Semi-processed hides- Finished Leather Sheets ........................................... 34
11.3. Stage3: Finished Leather Sheets ................................................................................. 34
11.4. Stage 4: Finished Leather Products ............................................................................ 34
11.5. Stage 5: Marketing of Finished Leather Products ...................................................... 35
12. Supply Side Issues ............................................................................................................. 35
12.1. Challenges Faced by the Leather Industry of Pakistan............................................... 35
12.1.1. Availability of Raw Materials ................................................................................. 36
12.1.2. Ineffective Supply Chain ........................................................................................ 36
12.1.3. Suspension of Water Supply ................................................................................... 36
12.1.4. Cost of Doing Business ........................................................................................... 36
12.1.5. Human Resource and Technology .......................................................................... 37
12.1.6. Awaiting Export Rebate Funds ............................................................................... 37
12.1.7. High Import Tariffs on Dyes, Chemicals and Organic Surface-Active Agents ..... 37
12.1.8. Low Value Addition ............................................................................................... 38
12.1.9. Lack of Certification, Registration and Absence of Brand ..................................... 39
13. Government of Pakistan’s Initiatives/Support to the Leather Industry .......................... 40
13.1.1. Exemption of 3% Custom Duty.................................................................................. 40
13.1.2. Exemption of Additional Custom Duty ...................................................................... 40
13.1.3. Reduction in Regulatory Duty on Import of Goods ................................................... 40
13.1.4. Drawback on Local Taxes & Levies on Finished Leather ......................................... 41
13.2. TDAP’s Initiatives ...................................................................................................... 42
14. SWOT Analysis: ................................................................................................................ 43
15. Conclusion and Recommendations .................................................................................... 45
References ..................................................................................................................................... 47
Appendix ....................................................................................................................................... 49
1. Pakistan Leather Industry: An Overview
The leather industry in Pakistan is predominantly an export-oriented industry. It stands second in
rank in terms of export earnings in the economy after textile. The industry’s share in the total
exports of the country during the fiscal year 2017-18 is 4.14% as reported by Pakistan Bureau of
Statistics. Currently the industry is consisted of “2500 (both registered and un registered)” 1 while
about “800”2 registered tanneries are working towards production of finished leather for exports
as well as for domestic consumption. The spatial distribution shows that the business units in this
sector are scattered in in number of cities including Peshawar, Gujranwala, Faisalabad, Kasur,
Sahiwal, Sialkot, Lahore, Multan, and Karachi. The highest concentration of registered units in are
found in the main cities of Sialkot followed by Korangi Industrial area of Karachi and Lahore
respectively as mentioned in the figure.1 below. Among these cluster destinations, around 90% of
leather products including leather garments are made in Karachi and Sialkot. Moreover, the
industry is further classified into five sub-sectors according to the type of products being produced.
These sub-sectors include tanning, leather garments, leather footwear, leather gloves, and other
leather manufactures. The industry is regulated by ministry of industries, while trade bodies like
Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA) and Pakistan
Tanners Association (PTA), and Pakistan Footwear Manufacturing Association (PFMA)
represents the industry and work as a bridge between the government and the industry. Moreover,
the industry is backed by training institutions like National Institute of Leather Technology (NILT)
Karachi and Leather Products Development Institute (LPDI) Sialkot for human resource and
product development through R &D.
1
Intraregional Trade in Leather and Leather Products in South Asia: Identification of Potential Regional Supply Chains. Delhi,
India: Asian Development Bank, 2015.
2 Pakistan Tanners Association (PTA); http://www.pakistantanners.org
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Figure 1. Leather Industry Cluster Locations- Number of Registered Units
Source: SBP
A snapshot of the industry’s production capacity shows that the sub-sectors of the industry have
performed well during FY2017-18 in terms of production as compared to the previous fiscal year.
The total quantity produced in the industry witnessed a 14.33% increase in FY2017-18 over the
year. Leather gloves have recorded a highest growth followed by leather garments. The lowest
growth rate in the production is observed in other leather goods. Table1 below show the production
in the sub-sector of leather industry for FY2016-17 and FY2017-18 along with growth rate over
the fiscal year.
Table 1. Pakistan Leather Industry - Production
Product Sb-Heading Quantity Produced ('000' SQM) Production
July-June 2016-2017 July-June 2017-2018 Growth Rate
Apparel & Clothing (Leather Garments) 753 861 14.34%
Leather Tanned 23,297 26,179 12.37%
Leather Gloves 4,751 6,032 26.96%
Footwear 5,339 6,018 12.72%
Other Leather Manufactures. 943 1,022 8.38%
Total Production 35,083 40,112 14.33%
Source: Pakistan Bureau of Statistics (PBS)
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2. Leather and Leather products’ Description
Leather products are classified into different categories based on their type, purpose, and
composition. The leather-based industry or leather product industry mainly produces raw hides
and skins, articles of leather or composition of leather, fur skins, footwears, and other leather
goods. Under the Harmonized System (HS) these products are categorized into four chapters
namely chapter 41- raw hides and skins, 42-articles of leathers, 43-fur skins, and chapter 63-
footwears.
• Chapter 41-Raw Hides

This chapter consists raw hides and skins differentiated from fur skin. The raw hides and skins are
classified semi-processed products.
• Chapter 42-Articles of Leather
A wide range of leather products mostly finished products fall under this heading. they include
garments and apparel of leather or composition of leather – i.e. trousers, skirts, coats, jackets,
waistcoats and protective clothing. In addition to that, gloves, mittens and mitts, belts and
bandoliers, hand bags, purses, travelling bags, trunk and suit cases, equipment use in saddlery and
harness, and articles for technical use of leather and other articles of leather or leather composition
are covered under this heading.
• Chapter 43-Fur Skin
This chapter consists limited products of fur skin and artificial fur including articles of apparel,
clothing accessories and other furskin articles, raw furskins, incl. heads, tails, paws and other
pieces, and tanned or dressed furskins,
• Chapter 64-Footwear
This category includes a range of footwears products differentiated on the base of the material
used in the 'upper' and the 'outer sole'. commonly used materials in footwear include plastic, rubber,
textile, and leather, composition leather and fur skin.
A description of the above-mentioned chapters is provided in the following table.

HS Code '41 '42 '43 '64
Product Raw hides and skins Articles of leather; Fur skins and Footwear, gaiters
Description (other than fur skins) saddlery and harness; artificial fur; and the like; parts of
and leather travel goods, handbags manufactures thereof such articles
and similar containers
Source: Trade Map
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• Synthetic/ Artificial or PU leather
The leather industry classifies another type of leather as synthetic leather, which is also marketed
under different names like imitation leather, faux leather, PU leather, vinyl leather or PVC leather,
and artificial leather. The industry’s classification is based on the composition of the leather owing
to presence of chemicals like polyurethane or polyvinyl chloride, or bio-based products in it. For
instance, coating cotton or soft polymer makes PU based artificial leather, which does not require
additional plasticizers and is commonly used in garment manufacturing. While for PVC leather,
plasticizers and dyes are added to PVC to make the fabric softer. Moreover, materials like plastic
sheeting, cellular plastic sheeting covered in Chapter 39 under sub heading 3921, and 3926 are
commonly used for making cases and containers classified under heading code 4202. Based on the
composition, products which fall under the sub heading 3921,3926, 5603,5903, 4202, 4205, and
6404 of HS code are treated as the synthetic leather products. following table provides description
of each product.
HS Product Description
Code
'3921 Plates, sheets, film, foil and strip, of plastics, reinforced, laminated, or similarly combined with other
materials, or of cellular plastic,
'3926 Articles of plastics and articles of polymers of ethylene, natural polymers
'5603 Nonwovens, whether or not impregnated, coated, covered or laminated
'5903 Textile fabrics impregnated, coated, covered or laminated with plastics
‘4202 Trunks, suitcases, vanity cases, executive-cases, briefcases, school satchels similar containers, of
leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber
‘4205 Articles of leather or composition leather (excluding saddlery and harness bags; cases and similar
containers;
'6404 Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of textile
materials
Source: Trade Map
Footwear, automotive industry, textile sector, and furnishing segment are the major end users of
synthetic leather.
3. Export Overview Pakistan’s Leather Sector

The leather sector’s contribution to the total exports of the country remained around 4.9 % during
2017. During past five years the aggregate leather exports depicted a mixed pattern of both
increasing and decreasing trends. Analysis shows that, an increase of 2.88% in the exports during
2014 was recorded as compared to previous year. However, from 2014 onward the leather exports
sustained a decreasing trend, which resulted the export value to recede at USD 1.06 billion in 2017.
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The aggregate leather exports for five years are presented in the figure 2. This sustained decrease
in exports is due to contract in the global demand for leather as well as bundle of challenges faced
by the domestic industry in terms of product diversification, technological upgradation and
compliance with environmental regulations.
Figure 2. Leather Sector Exports of Pakistan
1,600.00
1,382.76 1,422.57
1,400.00
1,230.13
1,200.00 1,102.63 1,067.12
1,000.00
USD Million
800.00
600.00
400.00
200.00
0.00
2013 2014 2015 2016 2017
Years
4. Pakistan’s Leather Export Composition at HS Code 2-Digit

At 2-digit HS code the export basket of the leather sector consisted of articles of leather, raw hides
and skin, footwear and fur skins and artificial fur. The composition of leather export during 2017
reveals that, more the half of the export is consisted of articles of leather. It constitutes around
59.22% (USD631.95) in the total leather exports. Leather articles are followed by raw hides and
skin, and footwear with 31.43% and 9.34 % share respectively. Fur skins and artificial fur stands
the last in the export basket with as little as 0.08% share in the total leather export. The composition
of leather export basket is presented in figure 3.
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Figure 3. Pakistan Leather Export Composition-2017
USD 0.09 Million
USD 99.73 Million 0.008%
9.35%
USD 335.35 Million

31.43%
59.22% USD 631.95 Million
42-Articles of leather 41-Raw hides and skins

64-Footwear, gaiters and the like; parts of such articles 43-Furskins and artificial fur; manufactures
Moreover, Average Annual Growth Rate (AAGR) is used to analyze variations in the leather
exports at 2-digit HS code for five years. The leather sector presented a negative growth of -2.44%
from 2013 over 2017. Segregation at 2-digit HS code shows that articles of leather, raw hides and
skins and fur skins regressed during the said period with a negative growth, while footwear exports
recorded a growth of 0.22%. Figure 4 represents the detail for the AAGR for 2013-2017.
Figure 4. Average Annual Growth Rate (AAGR) for Pakistan's Leather Exports-2013-2017
5.00%
Average Annual Growth Rate (AAGR)-(%)
3.00%
1.00% 0.22%
-1.00%
-1.08%
-3.00% -2.44% -2.61%
-5.00%
-5.00%
-7.00%
Leather Sector 42-Articles of leather 41-Raw hides and skins 64-Footwear 43-Furskins and artificial fur
6|Page
5. Pakistan’s Top Leather Exports- HS Code 6-Digit
The major leather exports at 6-digit HS code for 2017 identified as articles of apparel, of leather
or composition leather, gloves, mitten, and specially designed gloves for use in sport of leather,
grain splits leather "incl. parchment-dressed leather of bovine, leather further prepared after
tanning or crusting "incl. parchment-dressed leather", of goats, sheep and antelopes, and footwear
with outer soles of rubber, plastics or composition leather, with uppers of leather. And attempt is
made to analyze Pakistan’s leather export basket in terms of share of individual product exported
by Pakistan in aggregate global leather imports as well as individual product’s share global import
of that specific product. Analysis shows, during 2017, 25.83% Pakistan’s total leather exports is
consisted of article of apparels of leather which makes around 9.35% share in global imports for
this product. While, the share of this product in global aggregate leather imports is 1.23%.
Similarly, gloves, mitten excluding sports gloves make 18.40% share in Pakistan’s leather exports
while Pakistan has captured 12.53% of global imports for this product. However, the total share
of this product in aggregated global leather imports is 0.65%. The third major export of Pakistan
is grain split leather of bovines which has 10.72% share in our leather exports and it has captured
3.08% of global product specific imports. The share of this product in global aggregate leather
imports recorded around 1.55%. The next product in Pakistan’s leather export basket is specially
designed gloves for sports with a share of 9.58%, while in global imports for this product, our
shared remained at 22.30%. This product makes around 0.99% in the global aggregate leather
imports. Detail for the rest of the products, their share in Pakistan’s leather export basket, in global
import each product is provided in figure 5 while Pakistan’s exports value for five year along with
share of each product in aggregate global leather imports is provided in table 16 in the appendix.
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Figure 5. Share in Pakistan's leather Export and in Global Leather Imports
30.00%
25.83%
25.00% 22.30%
20.00% 18.40%
17.87%
% Share
15.00% 13.86%
12.53%
9.35% 10.72% 9.58%
10.00% 7.78%
6.47% 7.33%
4.75% 5.14%
5.00% 3.08% 3.44% 2.22% 0.41% 0.56%
3.02% 2.77%
0.26% 1.87% 1.61% 1.33% 1.09% 0.81% 0.81%
0.00%
'640399
'420310
'420329
'410712
'420321
'411310
'410792
'411390
'411200
'420219
'410449
'640320
'640590
'420100
Axis Title
Share in PAK Leather Exports 2017 Pakistan's leather Export Share in Global leather Imports 2017
This analysis reveals that most leather products we are exporting at HS 6-digit are being least
imported globally. For instance, articles of apparel of leather makes 25.83 % of our exports, while
it has only 1.23% share global leather imports. Similarly, gloves and mitten excluding sports
gloves constitute 18.40% of Pakistan leather exports, while the share of this product in global
leather imports is only 0.65%.the same situations persists in case of grain split leather of bovines,
sports gloves and tanned leather of goats. In addition to that we have captured a sizeable share in
the existing global imports for these products, but their low global demand put constraints to
increase the exports. The same is presented in a trade complementarity matrix in figure 6 showing
that our leather export concentration is classified as the one for which global demand is low, while
we fall behind in catering the exports of those products which are high in demand globally. The
bubble size in the complementarity matrix show the value exported by Pakistan during 2017.
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Share in Pak Share in Global
Product
Product label Leather Aggregate Leather
code
Exports 2017 Imports 2017
Articles of apparel, of leather or composition leather
'420310 25.83% 1.23%
(excluding clothing accessories, footwears)
Gloves, mittens and mitts, of leather or composition
'420329 18.40% 0.65%
leather (excluding special sports gloves)
Grain splits leather "incl. parchment-dressed leather",
'410712 10.72% 1.55%
of the whole hides and skins of bovine
Specially designed gloves for use in sport, of leather
'420321 9.58% 0.19%
or composition leather
Leather further prepared after tanning or crusting
'411310 7.78% 0.25%
"incl. parchment-dressed leather", of goats
On the other hand, some of the products which have huge world demand – as indicated by their
share in global leather imports (see figure 6), have low share in our leather exports as well as our
share in global product specific imports. Contrary to that, these products are highly demanded
globally as depicted by their share in global leather imports. For instance, footwear with outer
soles of rubber, plastics or composition leather, with uppers of leather - 640399 have a share of
11.22% in global leather imports, while this product makes 6.47% of our leather exports and our
share in global leather market for this product is 0.26%, indicating that there exists potential market
globally to be exploited. Similarly, handbags, whether or not with shoulder straps, incl. those
without handles, with outer surface-420221 have 5.75% share in global leather imports, while it
has around 0.66% share in our leather export basket and we have only tapped 0.05% of the global
potential market. The same is true in case of sports foot wear, travelling bags, which are in high
demand globally – depicted by share in global imports, while their share in our leather export
baskets is very low. It can be inferred that, we should prioritize the export of those products which
have a sizeable global demand, as our share in global imports for such products is low, and it
provide a margin to increase the exports over the years.
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Figure 6. Pakistan -World Trade Complimentary-Leather Exports
Moreover, trend analysis for leather exports at HS-6digits shows that majority of the exports from
Pakistan depict a negative AAGR between 2013 to 2017 and the same is true for global exports of
these products expect few. Over the said period articles of apparel, of leather or composition
leather-420310, specially designed gloves for use in sport, of leather or composition leather-
420321, leather further prepared after tanning or crusting of goats-411310, grain splits leather of
the portions, strips or sheets-410792, and leather further prepared after tanning or crusting of
sheep-411200 presented a negative AAGR for Global as well as Pakistan’s exports. This shows
that contract in global exports for these products is followed by Pakistan’s exports too. On the
other hand, gloves, mittens and mitts, of leather or composition leather-420329 recorded a negative
AAGR of 3.14% for Pakistan’s exports, while the global exports of this product remained 4.44%
over the said period. Similarly, footwear with outer soles of rubber, plastics or composition leather-
640399 and leather further prepared after tanning or crusting of antelopes- 411390 also depicts a
negative growth for Pakistan’s exports contrary to the global exports. Only for grain splits leather
"incl. parchment-dressed leather", of the whole hides and skins of bovine-410712 the AAGR
remained positive for global and Pakistan’s exports. Following figure 7 show the AAGR of the
leather products at HS 6-digit.
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Figure 7. Average Annual Growth Rate (AAGR) at 6-Digit-(2013-2017)
6. Pakistan’s Top Export Destinations for Leather and Leather Products

The major export destinations for Pakistan’s leather and leather product exports are from European
union. They include Germany with Pakistan’s exported value USD 163.2 million, USA
USD115.33 million, Italy USD87.48 million followed by Spain and UK with exported value of
USD 70.35 million and USD 57.78 million. Other than these markets, Netherlands, France Hong
Kong, China, and Canada makes to the list of top ten exports destinations for Pakistan’s leather
exports. Pakistan mostly exports articles of apparel, of leather or composition leather, gloves,
mitten, and specially designed gloves for use in sport of leather, grain splits leather "incl.
parchment-dressed leather of bovine, leather further prepared after tanning or crusting "incl.
parchment-dressed leather", of goats, sheep and antelopes, and footwear with outer soles of rubber,
plastics or composition leather, with uppers of leather to these countries. At 6-digit HS code
Pakistan exports 15.29% of leather to Germany, 10.81% to USA,8.20% to Italy, and 6.59% to
Spain. The detail of the rest is provided in the figure 8 showing both exported value to the top
destinations and their share in Pakistan’s leather export basket.
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Figure 8. Top Destinations for Pakistan's Leather Exports
180.00 18.00%
163.20
EXported Value-2017 (USD Million)
160.00 16.00%
Share in PAk Leather Exports (%)

15.29%
140.00 14.00%
115.33
120.00 12.00%
100.00 87.48 10.00%
10.81%
80.00 70.35 8.00%
8.20% 57.78
60.00 46.81 6.00%
6.59% 42.26 40.33 40.28
40.00 5.41% 27.23 4.00%
4.39% 3.96% 3.78%
20.00 3.77% 2.00%
2.55%
0.00 0.00%
Exported Value 2017 Share in Pak Leather Exports
7. Potential Products, Potential Markets’ Identification and Analysis

In this section potential products are identified which is then followed by identification of potential
markets for each potential product. Furthermore, each potential market is analyzed in terms of
competition faced by Pakistan from other countries. To come up with potential exports in the
leather sector following criteria is followed by considering both the demand and supply sides of
the products traded.
i. World import of each product to be US$ 500 million or more in value for the current year
(2017)
ii. Pakistan´s export of each product to the world to be US$ 50 million or more in value for
the current year
iii. Product -wise share of Pakistan’s export in world’s import to be 10 percent or less for the
current year
While to identify potential markets for the identified potential products following criteria is
adopted.
i. Import of each country from world the specific product to be US$ 100 million or
more in value for the current year (2017)
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ii. Pakistan’s market share of each product in each market to be 10 percent or less
for the current year
7.1. Pakistan’s Potential Exports in the Leather Sector
The potential products identified based on the above criteria include articles of apparel, of leather
or composition leather, grain splits leather "incl. parchment-dressed leather", of the whole hides
and skins of bovine, footwear with outer soles of rubber, plastics or composition leather, with
uppers of leather, and grain splits leather "incl. parchment-dressed leather", of the portions, strips
or sheets. It is pertinent to mention here, that these products are the major exports of Pakistan,
however there is need to exploit the exports of these products as our export share in the global
imports for these products is less than 10% as presented in table 2 below.
Amongst the identified potential items, three products at HS 6-digit are analyzed for potential
markets identification, unit price, market share and tariff rates in the potential market, and are
compared with the competitors of Pakistan. Moreover, competitors’ export promotion strategies
for these products are also discussed.
Table 2. Potential Leather Exports of Pakistan- HS 6-Digit Values in USD Million
Pakistan's Exports to World World Pakistan's
Product Imports Share in
Product label
code 2013 2014 2015 2016 2017 2017 World leather
Imports 2017
Articles of apparel, of leather
'420310 385.10 378.66 320.98 297.99 275.58 2,947.71 9.35%
or composition leather
Grain splits leather "incl.
parchment-dressed leather",
'410712 106.66 120.58 120.46 115.99 114.40 3,719.07 3.08%
of the whole hides and skins
of bovine
Footwear with outer soles of
rubber, plastics or
'640399 74.61 77.54 74.26 69.02 68.99 26,957.99 0.26%
composition leather, with
uppers of leather
Grain splits leather "incl.
parchment-dressed leather",
'410792 76.65 79.76 60.62 56.92 50.70 2,716.71 1.87%
of the portions, strips or
sheets
Source: Trade Map
7.1.1. Potential Markets for Export of Articles of Apparel of Leather or composition of Leather-
420310
Potential markets for the articles of apparel of leather and leather composition identified include
USA, France and Italy with Pakistan’s existing market share of 8.9%, 7.8%, and 3.6% respectively.
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In the USA market Pakistan face competition from China, Italy, and India with each country’s
market share of 34.78%,18.34%, and 17.79% respectively which is higher than that of Pakistan’s
market share. Moreover, Pakistan and India face the least tariff rate of 3% among the competitors.
In terms of unit price Pakistan offers lowest unit price of USD 38/unit as compared to its
competitors (see table 4).
Table 3. Potential Markets and Competitors for 420310 Values in USD Million
Potential Imports Pak Exports Pakistan's Competitors Exported Market Share
Markets from World to Country Market Value 2017
2017 2017 Share
USA 400.53 35.542 8.9% China 139.30 34.78%
Italy 73.46 18.34%
India 71.25 17.79%
France 270.60 21.153 7.8% Italy 63.43 23.44%
India 63.35 23.41%
Italy 208.12 7.4 3.6% India 51.99 24.98%
France 20.79 9.99%
China 7.95 3.82%
Source: Trade Map
Similarly, in France Pakistan face competition from Italy and India, both have market share higher
than that of Pakistan. In terms of tariff all the competitors including Pakistan face zero tariff for
this product in the French market while Pakistan offers the product at lowest unit price of USD
49,612/Ton as compared to the Italy and India.
In the Italian market India, France, and China are the major competitors of Pakistan. Each
country’s market share is way beyond that of Pakistan. Except China all the competitors face zero
tariff in the Italian market. Pakistan’s advantage in this market is its low unit price as compared to
the rest of the competitors.
Table 4. Tariff and Unit Price for 420310
Potential Tariff Faced by Pak- Unit Price Competitors Tariff % Unit Price
Markets Pakistan (USD/Ton) (USD/Ton)
USA 3.0% 38* China 5.3% 70*
Italy 5.3% 507*
India 3.0% 92*
France 0.0% 49,612 Italy 0.0% 276,673
India 0.0% 84,511
Italy 0.0% 36,571 India 0.0% 86,375
France 0.0% 251,687
China 4.0% 77,843
* The Unit Price is in USD/Unit Source: Trade Map
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7.1.2. Potential Markets for Export of Grain splits leather "incl. parchment-dressed leather", of
the whole hides and skins of bovine - 410712
Potential markets for the export of grain splits leather of hides and skins of bovine from Pakistan
include Italy and China with each country importing USD 299.01million and USD 549.80 million
from the world respectively. Pakistan face competition from Brazil and India in Italy while in
China it faces competition from Viet Nam additionally. In both markets Pakistan’s market share
is less than that of its competitors.
Potential Imports from Pak Exports to Pakistan's Competitors Exported Market
Markets World 2017 Country 2017 Market Share Value 2017 Share
Italy 299.01 18.25 6.10% Brazil 119.49 39.96%
India 52.84 17.67%
China 549.80 15.10 2.75% Viet Nam 54.87 9.98%
India 53.66 9.76%
Brazil 45.91 8.35%
Source: Trade Map
Pakistan has advantage over its competitors in the Italian market as its faces zero tariff rates while
Brazil and India face 6.30% and 2.80% tariff rates. Similarly, Pakistan export to this market at a
low unit price in comparison to the competitors. While in the Chinese market only Viet Nam enjoys
zero tariffs, while Pakistan, Indian, and Brazil face tariff rates of 4%, 6.50%, and 6.50%
respectively. In terms of unit price India offers the lowest of all, while Pakistan exports at highest
unit price to the Chinese markets.
Markets Pakistan (USD/Unit) (USD/Unit)
Italy 0.0% 13,774 Brazil 6.30% 14,242
India 2.80% 10575
China 4.0% 18,615 Viet Nam 0.00% 17,239
India 6.50% 9,778
Brazil 6.50% 16,809
Source: Trade Map
7.1.3. Potential Markets for Export of Footwear with outer soles of rubber, plastics or
composition leather, with uppers of leather - 640399
Potential markets for Pakistan’s export of footwear with outer soles of rubber, plastic or
composition of leather are USA, Germany, and UK each importing USD 5,268.26 million,
USD2,630.86 million and UDS 1,446.48 million from the world respectively. Pakistan face
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competition from China, Vietnam, Indian, and Italy. As compared to these competitors Pakistan’s
market share in each of the potential markets is negligible. Details are provided in table 7 below.
Potential Imports from Pak Exports to Pakistan's Competitors Exported Market
Markets World 2017 Country 2017 Market Share Value 2017 Share
USA 5,268.26 1.97 0.04% China 2,556.46 48.53%
Vietnam 1,078.77 20.48%
India 235.23 4.47%
Germany 2,630.86 23.67 0.90% Vietnam 512.19 19.47%
Italy 268.26 10.20%
China 279.19 10.61%
UK 1,446.48 3.10 0.21% Italy 197.66 7.51%
Vietnam 191.66 13.25%
China 170.25 11.77%
India 152.85 10.57%
Source: Trade Map
In the USA market all the identified competitors including Pakistan face the same tariff rate of
6.40%, while in terms of unit price China and Viet Nam offer the lowest at USD 16/unit, while
Pakistan and India offer USD 17/unit and USD 19/unit respectively. In the German market
Pakistan enjoys zero tariff, however its unit price the second largest after Italy. Similarly, in UK
market Pakistan exports at zero tariff and it also enjoys comparative advantage in term of unit price
as compared to the identified competitors. Detail are provided in table below.
Markets Pakistan (USD/Unit) (USD/Unit)
USA 6.4% 17* China 6.40% 16*
Vietnam 6.40% 16*
India 6.40% 19*
Germany 0.0% 28,045 Vietnam 4.20% 25,686
Italy 0.00% 61,218
China 7.70% 24,676
UK 0.0% 16,553 Italy 0% 83,971
Vietnam 4.20% 21,232
China 7.70% 18,752
India 4.20% 18,028
* The Unit Price is in USD/Unit Source: Trade Map
8. Global Leather Trade Scenario

In global trade the imports of leather and its products for the year 2017 is recorded USD 252.32
billion with a 1.43% share in the total global imports. Trend analysis for the imports show that the
aggregate global imports for leather and its products increased by 11.8% from 2013 over 2014.
However, a down turn in the import value is recorded for two conservative years following 2014.
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The contraction than recovered in 2017 with a 6.7% increase in the imports over the year. At HS-
2 digits more than half of the leather sector imports consisted of footwear with imported value of
USD 135.70 billion as of 2017. The remaining products chapters include 30.8% (USD 74.87
billion) articles of leather of composition of leather, 11% (USD 26.95 billion) raw hides and skins,
and 2.5% (USD 6.08 billion) fur skins.
Figure 9. World Leather Import Composition-2017
2.5%
11.0% 64-Footwear
42-Articles of leather
41-Raw hides and skins (other than

furskins) and leather
43-Furskins and artificial fur
55.7%
30.8%
The AAGR for global leather import recorded an increase of the imported value by 1.90% from
2013 through 2017 showing that the pace of leather and leather products import growth is low but
positive. Within the sector, footwears stand to have highest AAGR with a 3.07% during the said
period, while articles of the leather depicted an AAGR of 2.19%. on the other hand, raw hides and
fur skin contracted by 1.79% and 4.01% respectively for said period in terms of AAGR. The low
share of leather exports and AAGR is attributed to global high prices and extensive certification
and meeting environmental standards associated in traded the products.
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Figure 10. Average Annual Growth Rate for World Leather Imports-(2013-2017)
4.00%
3.07%
3.00%
Average Annual Growth Rate(%)
2.19%
1.90%
2.00%
1.00%
0.00%
Leather Sector 64-Footwear 42-Articles of leather 41-Raw hides and 43-Furskins and
-1.00% skins artificial fur
-2.00%
-1.79%
-3.00%
-4.00%
-4.01%
-5.00%
9.1. Global Top Importers of Leather Products
World top importers of leather product includes USA with a total share of 13.58% in the total
global imports of leather followed by China and Italy with 8.90% and 6.88% share as of 2017. The
remaining importers are Hong Kong, Japan, Germany, France and UK. The share of each country
in the total world leather import and the value imported is presented in the figure11 given below.
Figure 11. Top Global Importers of Leather and Leather Products
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9.2. Global Top Exporters of Leather Products
In the exports of leather and leather products China has captured around 29.50% share at global
level with exported value of USD 33.13 billion during 2017. Italy is the second top exporter with
a global market share of 12.59%, followed by France, Hong Kong and USA with a market share
of 7.42%, 5.74%, and 4.04% respectively. Pakistan’s share in the global export of leather for 2017
is recorded 0.86% with an exported value of USD 0.96 billion and it ranks 18th among the top
leather exporters. Figure 12 presents share of top exporters in aggregate global leather exports and
the value exported during the year 2017.
Figure 12. Top Global Exporters of Leather and Leather Products
9.3. Global Trend of Leather Exports at HS 6-Digit
Globally the major export of leather products at HS 6-didgit include footwears with outer sole of
leather or leather composition, rubber and textile materials, sports footwears, hand bags, travelling
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bags, insulated food or beverage bags, toilet bags, trunks, suitcases and vanity cases. Table 9 below
shows that top four products are from chapter 64-foot wear. Around 10.45% of the global leather
export basket consisted of footwear with outer soles of rubber, plastics or composition leather,
with uppers of leather, while footwear with outer soles and uppers of rubber or plastics (excluding
covering the ankle) has 10.31% share and footwear with outer soles of rubber or plastics and uppers
of textile materials has a share of 9.28% share in the export basket. The footwears are followed by
hand bags, travelling bags and trunks with share of 5.51%, 4.68%, and 5.05% in the export basket.
Remaining products have less than 2% share in the export basket.
Table 9. Top Global Leather Exports at HS 6-Digits Values in USD Million

Product Product label Exported Share in Annual
code value in Total World Growth
2017 Leather Rate
Exports-2017
'640399 Footwear with outer soles of rubber, plastics or 26,356.54 10.45% 6.10%
composition leather, with uppers of leather
'640299 Footwear with outer soles and uppers of rubber or plastics 26,010.93 10.31% 2.99%
(excluding covering the ankle)
'640419 Footwear with outer soles of rubber or plastics and uppers 23,412.13 9.28% 15.84%
of textile materials
'640411 Sports footwear, incl. tennis shoes, basketball shoes, gym 13,996.72 5.55% 17.06%
shoes, training shoes
'420221 Handbags, whether or not with shoulder straps, incl. those 13,896.80 5.51% 10.89%
without handles
'420292 Travelling-bags, insulated food or beverage bags, toilet 11,805.49 4.68% 14.37%
bags, rucksacks, shopping-bags
'420212 Trunks, suitcases, vanity cases, executive-cases, 12,742.28 5.05% 6.04%
briefcases
'640391 Footwear with outer soles of rubber, plastics or 11,555.19 4.58% 5.50%
'430310 Articles of apparel and clothing accessories of furskin 4,260.56 1.69% 11.20%
(excluding gloves made of leather)
'420231 Wallets, purses, key-pouches, cigarette-cases, tobacco- 4,670.27 1.85% 6.88%
pouches
'410712 Grain splits leather "incl. parchment-dressed leather", of 4,489.36 1.78% -0.86%
the whole hides and skins of bovine
'420500 Articles of leather or composition leather (excluding 3,448.23 1.37% -2.03%
saddlery and harness bags; cases)
'640690 Parts of footwear; removable in-soles, heel cushions and 3,038.10 1.20% 13.68%
similar articles
'410150 Whole raw hides and skins of bovine "incl. buffalo" or 3,738.11 1.48% 2.57%
equine animals, whether or not dehaired
Source: Trade Map
An analysis is carried out to gauge the trend of global leather exports using two indicators i.e. share
in leather export basket and annual growth rate for the top global exports at HS 6-digits. Based on
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the analysis the products are classified into four categories (see figure 13, divided into four
quadrants). In the first category the products are classified as “low demand and dynamic”, where
the low demand is derived from share of individual product in the leather export basket- which is
less than 5%, and dynamic is derived from their annual growth rate which is more than 5%.
Products like 640690- parts of footwear, 430310- articles of apparel of fur skin, 420231- wallets,
purses, and 420292- travelling bags fall in this category. These products exhibited healthy export
growth, however their share in the export basket is low. The second category is “high demand and
dynamic” meaning to say a product with both share in the export basket and annual growth rate
greater than 5%. This includes products 640411- sports footwear, 420221- hand bags, 640419-
footwear with outer soles of textile materials, 640399-footwear with outer soles of rubber, plastics
or composition leather, and 420212- trunks, suitcases, vanity cases. These products set a direction
for Pakistan to earn from exports in the leather sector. Among these identifier products only
640399-footwear with outer soles of rubber, plastics or composition leather is among the top
exports of Pakistan, while for the remaining products production is not enough to cater the world
demand. Thus, there is a need to diversify the leather export basket by focusing to promote exports
of sports footwear, hand bags, footwear with outer soles of textile materials, and trunks, suitcases,
vanity cases. In the third category, products are classified as “high demand and static” i.e. the
products have more than a 5% share in the global leather exports, but their annual export growth
rate is less than 5%. Footwear with outer soles and uppers of rubber or plastic-640299 falls in this
category. The final category includes those products for which demand is low and their export is
static meaning to say that both their share in global leather exports as well as their annual growth
rate is less than 5%. Products like 410510- raw hides, 410712-grain split leather, and 420500-
articles of leather fall in this category. Moreover, these products have major share in the leather
export basket of Pakistan, which implies that we are exporting at the lower end with respect to
market dynamics, therefore there is a dire need to structurally adjust the export composition in
accordance with world trends.
21 | P a g e
Figure 13. World Trend Matrix for Leather Export-2017
22.00%
1. Low Demand & 2. High Demand
20.00%
Dynamic 640411- Sports Footwear & Dynamic
18.00% 640419-Footwear with outer
420292- Travelling Bags soles of textile materials
16.00%
640690- Parts of
14.00% Footware
Annual Growth Rate (%)-2017
12.00% 430310- Articles of 420221- Hand Bags

apparel of furskin
10.00% 640399-Footwear with outer soles of
rubber, plastics or composition leather
8.00% 420231- Wallets, Purses 420212- Trunks, Suitcases,
Vanity cases
6.00%
640391-Footwear-
composition leather
4.00% 410510- Raw hides
2.00% 640299-Footwear with outer soles and

410712-Grain Split Leather uppers of rubber or plastics
0.00%
-1.00% 1.00% 3.00% 5.00% 7.00% 9.00% 11.00% 13.00%
-2.00%
420500- Articles of Leather
-4.00%
3. Low Demand 3. High Demand
& Static
Share in Global Leather Exports (%)-2017 & Static
9.4. Global Trade Trend for Synthetic Leather
The market trend for synthetic leather is rapidly expanding. In a market research report the Grand
View Research3 has reported the global synthetic leather market size worth of USD 25.61 billion
in 2017 and projected to expand at a CAGR of 7.4% during 2019-2025. The increasing market
demand for the synthetic leather is reinforced by growing awareness about animal rights, and
stringent laws regarding the usage of real leather, its comparatively low price, and Supply-demand
gap in natural leather industry – that has made manufacturers to opt for artificial alternatives.
Moreover, the application side of synthetic leather also reflects its expanding demand, for instance,
increasing global demand for footwear and automotive industry, furnishing segment are the key
factors in propelling the overall market growth for synthetic leather. Analysis of selected synthetic
products (see table 10) at HS 6-digit shows that the CAGR calculated for 2013 to 3017 turned to
3 Synthetic Leather Market Size, Share & Trends Analysis Report By Product (Bio-based, PVC, PU), By Application (Clothing,
Furnishing, Automotive, Bags & Wallets, Footwear), By Region, And Segment Forecasts, 2019 – 2025:
https://www.grandviewresearch.com/industry-analysis/synthetic-leather-market
22 | P a g e
be positive, and almost all products import for 2017 recorded more than USD 1 billion. A trend
analysis for five-year global imports is provided in appendix table 18. Moreover, it also shows that
Pakistan’s market share in the global export for these products is negligible.
Regional dynamics show that emerging regional markets, such as China, India, Brazil, Malaysia,
Thailand, and Vietnam are expected to play a critical role in the demand of synthetic leather.
rapidly expanding footwear and automobile industries in these and several other regional markets
is expected to contribute to the growth of global industry over the next few years. Within Asia
Pacific China, India, Japan and South Korea are expected to be the major growth-driving
economies. Similarly, in North America USA, Canada, and Mexico, while in Europe, France,
Germany, UK, and Poland are also expected to witness significant growth owing to rising demand
for cruelty-free products. On the exports side the major global exporters for synthetic leather
include China, Germany, USA, Italy, South Korea, Japan, and France.
Table 10. Synthetic Leather Pakistan-World Trade Trend Values in USD Million
Product Product label World's World Pakistan's Pakistan's
Code Imports Imports Exports Market
2017 CAGR (2013- 2017 Share 2017
2017)
'392190 Plates, sheets, film, foil and strip, of plastics, 0.82% 0.33 0.002%
reinforced, laminated, supported 14,735.12
'392620 Articles of apparel and clothing accessories 0.57% 0.11 0.003%
produced by the stitching or sticking together 4,343.33
'392113 Plates, sheets, film, foil and strip, of cellular 0.82% 0.11 0.003%
polyurethanes, unworked or merely surface- 4,114.38
worked
'590320 Textile fabrics impregnated, coated, covered or 1.27% 0.43 0.011%
laminated with polyurethane (excluding 4,111.35
wallcoverings
laminated with plastics other than poly"vinyl 3,895.28
plastic, unworked or merely surface-worked 3,635.04
'560311 Nonwovens, whether or not impregnated, 1.23% 0.01 0.000%
coated, covered or laminated, n.e.s., of 2,418.43
synthetic or
laminated with poly"vinyl chloride" 2,392.45
coated, covered or laminated, n.e.s., of man- 2,195.46
made filaments
polymers of vinyl chloride 2,072.61
coated, covered or laminated, n.e.s., of man- 2,035.93
made filaments
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coated, covered or laminated, n.e.s. 1,988.12
coated, covered or laminated, n.e.s. 1,584.28
'560393 Nonwovens, whether or not impregnated, -0.46% 0.00 0.000%
coated, covered or laminated, n.e.s., weighing 906.30
> 70
Source: Trade Map
9. Competitors’ Export Strategies

This section discusses export strategies employed by the competitors including Italy, China,
India, and Vietnam for export promotion of leather products.
9.1. Italy’s Strategy
Leather is a traditional product for Italy, and the country leads the world in the production and
export of leather. About 34.43 percent of world leather export comes from Italy with an exported
value of USD1.549 million as of 2017. The Italian tanning industry is dominated by Small and
Medium-sized firms (SMEs). The industry has strong innovation capacity, high-value addition,
high levels of efficiency and flexibility in adopting modern trends and fashion. It has transformed
its sustainability into a competitive advantage and has even established an international
certification body – Institute of Quality Certification (ICEC), which leads globally. The institute
offers the market voluntary certifications attesting the quality, reliability, credibility and
sustainable commitment of companies in the leather sector. Some of the certificates include;
certification of laboratories for leather testing, quality management, product certification,
chemicals management in tannery, occupational, health and safety management systems. To safe
guard the end user, the tanning industry complies with regulations, which regulate the entry of
products in the consumer-goods' market. It not only ensures the use of chemicals in accordance
with Registration, Evaluation, Authorization and Restriction of Chemicals (REACH)4 and
Persistent Organic Pollutants (POP)5 regulations, which are mandatory in Europe, but goes beyond
by implementing a series of checks over its finished product to further ensure the proper
management of chemicals during the process.
4
REGULATION (EC) No 1907/2006 of the European parliament and of the council of 18 December 2006 concerning the
Registration, Evaluation, Authorization and Restriction of Chemicals (REACH)
https://echa.europa.eu/en/regulations/reach/legislation
5 REGULATION (EC) No 850/2004 of the European parliament and of the council of 29 April 2004 on Persistent Organic
Pollutants (POP). http://ec.europa.eu/environment/chemicals/international_conventions/index_en.htm
24 | P a g e
ICEC Certifications:
Certification Technical Specifications ICEC: Certification of Laboratories

for Leather Testing
• To validate laboratories working with leather by controlling the management of all aspects, in accordance with the principles of quality
specified under ISO 17025 standard.
• Such aspects include personnel training, the test environment, instrument management, and the preparation of test reports.
• Periodical verification of these aspects is carried out in order to ensure the utmost reliability of the test conducted on leather, including
physical, chemical and fastness tests.
Certification Technical Specifications ICEC: Chemicals Management in Tannery
• Provides information to companies wanting to get certificates on the substances to look for, the national limits in force:
o Among the main destination markets,
o On testing methods and control procedures
o With regard to the type of leather article and the raw material used.
Certification Occupational Health and Safety Management Systems
• To identify and keep under control all the risks related to health and safety in the workplace
• To reduce the number of possible accidents,
• To be compliant with the legislation in force
• Its application provides companies with tax breaks from INAIL (Italian Institute for Insurance against Work Accidents).
Product Certification by Destination Sector Footwear, Leather Goods, Furnishings, Garments, Car Interiors
• Certification is granted according to UNI (Italian Institute for Standardization) specific standards
• The certification provides customers with information concerning a product performance including assessment of the:
o Company system of quality assurance
o Primary standards regarding the safeguarding consumers' health and safety
Italy has also introduced trademarks "Vera Pelle" and "Vero Cuoio" to protect consumers. The
trademarks have been registered by United Nations Information Centre (UNIC). They attest to the
authenticity of the material and guarantee the safety of the products, the compliance with technical
performance and the Italian origin.
Technological Advancement:
Technological advancement has become a prerequisite for the Italian tanneries to develop a highly
diverse and fragmented range of products. It is also important not only to improve the efficiency
of the production process and the optimization of costs but also associated with improvements in
the sustainability of Italian tanneries. Such sustainability can be achieved through a more efficient
use of resources (water, chemicals and energy) and by avoiding waste and minimizing the
environmental impact through implication of technology. Italian tanneries have invested in
thematic areas which include Digitalization and Automation of Process – to manage operating
information in real time, Automation of the Drum Department – to control and manage working
times and water loads, including remotely, and Automatic Supply of Chemicals – to optimize the
use of chemicals and consequently limit waste and reduce the pollutant load. In this context, the
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“Italian National Industry Plan 4.0”6 2017-2020 is a fundamental opportunity for availing
significant incentives to investments in equipment and technologies and their implementation in
industries. Under this National Industry Plan 4.0 plan the Italian Ministry for Economic
Development (MISE) provides two types of annual tax incentives ‘hyper and super depreciations’
schemes support companies in their tangible investments in their technological and digital
transformation processes. For hyper-depreciation, the investment costs are increased by 150% of
their value, while for super-depreciation by 40%. Furthermore, Innovative Start-ups and SMEs’
can benefit from tax breaks for equity investment in startups up to 30%. Italy host following trade
fairs on annual basis.
• MICAM Milano International shoe fair: 15 -18 September 2019
• Lineapelle Milano International trade fair for the leather industry: 02 - 04. October 2019
• Mipel International fair for bags, leather-goods and fashion accessories: August 2019
9.2. India’s Strategy
India has a comparative advantage in terms of availability of raw material – 21% of world cattle
& buffalo and 11% of world goat & sheep population are housed in India and can assimilate new
technologies with an emphasis on product development and design. It has diversified leather
products including a sizeable production of leather clothing and other leather goods. The country
has established “leather parks” to attract investment in the leather and footwear sector. The
Government of India has allowed 100% FDI through automatic route in this sector, and it has
witnessed an “FDI inflow of USD 53.64 million”7 from 2014 through 2017.
The government has identified this sector as one of the focus sectors under its “Make in India
Initiative” and has proposed to extend the flagship scheme ‘Indian Leather Development
Programme (ILDP)’ – ended in 2017, for the next three years period 2017-2020, and allocated
Indian Rupees. 26 billion in the Union Budget 2017-18. The scheme would lead to development
of the infrastructure, environment specific concerns of the leather sector, facilitate additional
6 The Italian Ministry of Economic Development has launched the Industrial 4.0 National Plan (I4.0) – a strategy aiming at
supporting industrial change through a series of conjunctional measures seeking to promote investments in innovation, technology
and skills development while taking into consideration principles set by the fourth industrial revolution. The Government has
allocated €18 billion for 2017-2020.
7Government of India Ministry of Commerce & Industry, Department of Industrial Policy & Promotion
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investment, employment generation and increase in production. Its sub schemes include, Human
Resource Development (HRD), Integrated Development of Leather Sector (IDLS), establishment
of institutional facilities, Mega Leather, Footwear and Accessories Cluster (MLFAC), leather
technology, innovation and environmental issues, and promotion of Indian brands in leather,
footwear and accessories sector. Under the IDLS it is proposed to incentivize investment and
manufacturing in the sector by providing a subsidy @30% of the cost of new plant and machinery
to Micro, Medium and Small Enterprises (MMSEs) and @ 20% for technological upgradation in
existing units as well as for setting up new plants. Under the IDLS and outlay of Rs.4.25 billion is
proposed to provide incentives to 1000 units of leather, footwears and accessories, component
sectors for three years. Further the, under the institutional facilities scheme the government has
devoted Rs.1.47 billion to upgrade the existing Footwear Design & Development Institutes (FDDI)
into “Centers of Excellence” and to establish three new fully equipped centers along with the mega
cluster project. Further to support infrastructure development in the leather sector MLFAC
development is proposed in which the government has decided to provide 50% of the project cost
in addition to provision of Rs.1.25 billion for land procurement. The Indian government is keen to
modernize the leather sector and to address the environmental issue concerning it. Therefore, it
has proposed to subsidize 70% of the cost to upgrade Common Effluent Treatment Plants (CETPs).
A budget of Rs.7.86 Billion is allocated for the same over three years. Indian government is
conscious about branding its products. For leather products the government has proposed to
provide 50% of the brand promotion cost with a cap of Rs.30 million for each brand, each year for
three years. The government has decided to promote 10 brands under this scheme for three years.
To facilitate imports essential inputs used towards finished export products, the Indian government
has introduced Duty Free Import Scheme (DFIS) in its foreign trade policy 2017-18.
Manufacturer-exporters of leather garments are allowed duty free import of certain essential inputs
(lining and inter-lining materials) to an extent of 3% of FOB value of export realization in the
previous year. While manufacturer-exporters of leather footwear or synthetic footwear or other
leather products, are permitted duty free import of the following critical inputs to an extent of 5%
of previous year’s FOB value of export realization. In addition to that, duty-free import of raw
hides and skins, wet blue chrome tanned leather, crust and finished leather of all kinds including
splits and sides thereof is allowed to facilitate value-added exports.
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Domestic Fairs
Fairs Date Products
India International Leather Fair, Chennai Fe 1-3, 2019 Leather, Leather products, Chemicals,
Machinery and Accessories
India International Leather Fair, Kolkata Feb/March Leather, Leather products, Chemicals,
Machinery and Accessories
India International Leather Fair, New Delhi Aug 2-4, 2019 Leather, Leather products, Fashion
Accessories, Machinery and Equipment, and
Chemicals
International Fairs
Indian Leather Show, Dusseldorf, Germany, Feb 19-20, 2019 Leather, Footwears
APLF (Asia Pacific Leather Show), Hong March 13-19, Leather, Leather Products, Machinery
Kong 2019
Source: http://indiatradefair.com/knowledge/details/abroad18-19/abroad_sidebar
It is to note that the leather exports to EU from India are no more covered under standard GSP
status, as Indian leather graduated from the status. Thus, there is an opportunity for Pakistan to
capture the market.
9.3. China’s Strategy
The leather industry occupies a place of prominence in the Chinese economy due to its massive
potential for employment, growth and exports. It’s one of the oldest industries which have
modernized very fast during last three decades especially during last decade. China by and large
is the major importer of hides and skins globally. China's demand for leather stems largely from
its extensive interests in the automotive and footwear sectors, with producing 40% of the global
shoes and 30% of the world's cars, with the latter primarily intended for its domestic market.
However, the imports over the past five years have been largely stagnant, and recently imports
have begun declining. For example, in the first quarter of 2018 imports were down nearly 10
percent from the same period last year. some of the factors contributing to this demand reduction
include: material substitution, increasing labor rates, tightening environmental policies.
China enjoys economies of scale in production of leather and leather products, through labor
productivity and implication of modern technology. For instance, most of the companies in china
have some form of computer-aided design (CAD) systems.
The sector is being supported by the government and allied institutions. For instance, China
Leather Industry Association (CLIA) – a national organization founded in 1998, consisting of 300
members serves the entire leather industry. It covers fur and leather tanning, footwear, leather
apparel, leather products and chemical agents related organizations, research institutes and
universities and briefcase industries. CLIA was mandated to bridge the gap government and
28 | P a g e
enterprises in order to execute governmental policies and decisions related to the development of
the industry. It also supports the development of national leather industry with market researches,
survey studies about the leather industry, branding studies, researches about science and
technology, various training and information activities China. For instance, to promote R&D in
the footwear industry the CLIA has established “China leather and footwear industry research
institute” located in Beijing was founded in 1959. It is a state-owned enterprise and employs 120
researchers and assistants. The institute concentrates on research, technology development, quality
assurance (testing), standardization and environmental protection related to leather processing,
footwear and other leather goods (including fur products) manufacturing. Furthermore, to support
the industry Value Added Tax (VAT) on leather products is reduced to 13% from 17%, with a
target to reduce it to 5%. China is using E-commerce platform readily for its exports. China leads
the world in e-commerce. More than 40% of the world's e-commerce transactions currently take
place in China, up from only 1% about a decade ago. The same has become the new point of
growth in the leather industry. Every year China hosts All China Leather Exhibition (ACLE), also
known as Shanghai Leather Fair, the only international leather fair in China. It is organized by
China Leather Industry Association (CLIA) and Asia Pacific Leather Fair Limited (APLF)
9.4.Vietnam’s Strategy
Vietnam has a competitive leather and footwear industry owing to the country’s economic
stability, consistent trade policy in addition to abundant supply of cheap and highly-skilled labor.
In the leather sector, the country has adopted development plans focusing on sustained
development, value addition through innovation and technological advancement, and improved
quality for both domestic and international markets.
Leather footwear is the key export -oriented industry in Vietnam. Footwear enterprises in Vietnam
focus more on brand promotion to sell their products in international markets. Most of the
Vietnamese companies are investing in machines with modern technology to automate many
production stages to increase productivity, improve quality. Furthermore, the country has
augmented production of its own raw material for the footwear industry. In addition to that low
labor cost has attracted number of international footwear manufacturers to establish their unit in
Vietnam. Further to that Vietnam’s actively utilization of Free Trade agreements (FTAs) led the
footwear industry to achieve significant growth. Such FTAs Include:
• The Trans-Pacific Partnership (TPP) with 12 Asia - Pacific countries
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• EU-Vietnam Free Trade Agreement (FTA) and the EU-Vietnam Investment Protection
Agreement (IPA) agreed on July 2018.
• The Free Trade Agreement with Customs Union of Russia - Belarus - Kazakhstan, and the
ASEAN Economic Community Agreement effective in 2015.
In addition, Vietnam’s leather and footwear sector remains the beneficiary of technical assistance
and support projects from the EU, United Nations UNIDO- the leather panel, SWITCH Asia and
Centre for the Promotion of Imports from developing countries (CBI).
Moreover, under “2011- Industrial Development Strategy through 2025, vision toward 2035” for
garments, textile, leather and footwear sector the government of Vietnam has prioritized the
production of raw and auxiliary materials serving production for domestic market and export till
2025 and to produce fashion clothing and luxury shoes afterwards. To serve the initiative the
government has initiated the development of material supplying centers to serve producers of
garments and textiles, footwear, and mechanical products.
10. Non-Tariff Barriers

Leather and leather products face a range of non-tariff barriers such as standard certifications,
chemical requirements, labelling, product safety directives, and environmental compliance in the
global trade.
10.1. Certifications
In the global trade of leather and leather products certification is necessary to acquire niche status
in the global market. Number of certification schemes for leather products are available and
accepted globally for leather trade.
10.1.1. OEKO-TEX Leather Standard
It is a global testing and certification system for leather and leather products at all levels of
production. It includes certification of semi-finished leather products (i.e. Wet-blue, Wet-white,
Crust), finished leather, leather fiber material, readymade articles (garments of all types,
accessories, leather gloves, leather handbags, leather covers). The standard 100 certification of
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OEKO-TEX8 guarantees that no hazardous chemicals including those restricted by REACH were
used in the production process
10.1.2. Leather Working Group (LWG) Registration
LWG9 is a multi-stakeholder international platform, consisting of retailers, manufacturers,

chemical companies, and other related parties involved in the global leather industry also audits
and rates leather producers; the organization promotes the selection of rated suppliers for more
sustainable leather. It aims to ensure and promote environmental-compliance in the production of
leather commodities involved in international trade. LWG has made it mandatory for members to
comply with certain quality and treatment standards (such as installation of Combined Effluent
Treatment Plants (CETP)) to limit environmental degradation.
10.1.3. Eco-Labelling
The purpose of eco-labelling10 is to minimize the impact of products on the environment by adopting
eco-friendly best practices when developing product lines. EU markets are rigorous following the
standards set under eco-labeling for leather products, footwears and textile products.
10.2. Chemical Requirements
In European markets there are number of quality standards being enforced by Regulation for
Registration, Evaluation, Authorization and Restriction of Chemicals (REACH)11 for chemicals
used in the leather tanning process. For instance, certifications regarding the use of hazardous
chemicals such as Azo dyes and Pentachlorophenol (PCP) in textile and leather products are
required for the markets in EU. The use of both these inputs has been banned due to their cancer-
causing nature. More recently REACH has restricted the use of Chromium (VI) compounds12.
The regulation states that “Leather articles, or leather parts of articles, coming into contact with
the skin, shall not be placed on the market if they contain chromium (VI) in concentrations equal
to or higher than 3 mg/kg (0.0003%) chromium (VI) of the total dry weight of the leather”. Leather
manufacturers are also required to produce environmentally friendly products
8
https://www.oeko-tex.com/en/business/business_home/business_home.xhtml
9
https://www.leatherworkinggroup.com/
10
http://ec.europa.eu/environment/ecolabel/
11
https://echa.europa.eu/regulations/reach/understanding-reach
12
European Chemical Agency
https://echa.europa.eu/documents/10162/23665416/rest_cvi_leather_opinion_rac_10750_en.pdf/e55bb713-
4100-018b-ac13-ad1070658e75
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10.3. Convention on International Trade in Endangered Species (CITES)
CITE13 is an international agreement between governments. Its aim is to ensure that international
trade in specimens of wild animals and plants does not threaten their survival. It is applicable to
products made from wild plants and animals. Import and export of live specimens, of their parts
or of products derived from them is either banned or else permitted only with special authorization.
10.4. Other Requirements
Most of the other requirements are of technical in nature include product quality or
performance requirement, safety labelling for consumers, sizing standards. Most buyers
expect the manufactures to comply with these requirements.
11.Value Chain Analysis for Leather and Leather Products

Value chain analysis provides a dynamic and strategic framework to evaluate the intra-industry
performance for its entry into the global economy. Value chain encompasses the entire life cycle
of products from conception to recycling process. It is defined as “the full range of activities that
firms do to bring a product from its conception to its end use and beyond”14. The process involves
activities such as design, production, marketing, distribution and support to the final consumer.
These activities can be carried out within a single firm or out-sourced to other firms according to
nature of the product produced and the inputs required in the production process.
A visual of typical value chain process is provided in figure 14. One of the healthy sings for being
part of global commodity chain is that, it reinforces competition and innovation in the industry and
the economy at large to keep pace with emerging trends globally.
13
https://www.cites.org/eng/disc/what.php
14
https://globalvaluechains.org/concept-tools emphasis added (Accessed 22/09/17)
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Figure 14. An Elementary Form of Value Chain Process
The value chain mapping for leather is broadly classified into four main categories or stages
including supply of hides, semi-processed leather to finished leather sheets, finished leather
products, and the market. These main processes are highlighted in green in the flow chart for value
chain shown in figure 15. It is pertinent to mention here that, at every stage of the value chain for
leather industry, R&D is equally necessary in achieving efficiency, economy of scale and
innovation in production to keep pace with change trends of the global economy and
environmental considerations in particular.
11.1. Stage 1: Hide Supply
The leather industry depends on the livestock industry as leather is one of the by-products of the
later and it is the prime input for the former. The livestock industry of Pakistan has a dominant
share of “57 percent in the agriculture sector for the FY 2017-18”15. Its contribution in GDP for
the same period is recorded around “11 percent”16. The first stage of leather value chain mapping
involves procurement of the raw animal hides and skin. Official statistics show that the production
of hides and skin witnessed 3.3% and 2.3% growth rate in FY2017-18 over the year (see table 11)
However, according to State Bank’s report of the State of Economy, a large number of live animals
smuggled to neighboring countries during FY 2017, resulting in shortage of raw hides and skin to
the leather industry. Secondly at this stage of value chain, the country lacks efficient mechanism
to preserve the hides which leads deterioration in quality mostly the Eidul Azha where the hides’
supply increases manifold.
15
SBP; SOE-FY-2017-18
16
Ibid.
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Table 11. Production of Hides & Skin Units (‘000’ Nos)
Product Description 2016-17 2017-18 Growth Rate
Hides 16.42 16.97 3.3%
Skin 55.53 56.8 2.3%

Source: Ministry of National Food Security & Research
11.2. Stage 2: Semi-processed hides- Finished Leather Sheets
In this stage raw hides and skin undergo several processes such as tanning resulting in wet blue
leather followed by crusting to produce finished leather sheets. Within tanning the raw hides and
skin pass through a series of actions namely, soaking, de-fleshing, liming, bating, pickling, de-
pickling, splitting, neutralizing, and filling out to attain a semi process form. The tanning results
in wet blue leather. Two common methods used in tanning are chrome tanning and vegetable
tanning. Chrome tanning involves application of chromium salt in the tanning process at wet blue
tanneries, while vegetable tanning is a method of using plant materials like bark and leaves to
convert animal skins into durable leather. To ensure smooth supply of the inputs to the leather
industry the government has exempted 3% custom duty on the import of tanned hides in wet state.
11.3. Stage3: Finished Leather Sheets
At this stage the wet blue leather obtained as a result of tanning is further processed into finished
leather sheets by crusting – a process that thins, re-tans and lubricates the leather. Greasing and
dyeing add value to the wet blue leather at this stage. Moreover, the type of finished leather
depends entirely on the product that it will become part of, which is why leathers tend to be
separated at this point. Therefore, it is common to find a separation of the tanning process between
different types of tanneries, i.e. between those producing only wet blues, those producing for
footwear, and those producing for automotive use.
11.4. Stage 4: Finished Leather Products
The finished leather sheets obtained by tanning and crusting processes are passed through pattern
making, stitching and cutting to give a final shape of different leather products such as leather
garments & apparels, footwears, gloves, handbags, suitcases, trunks and other accessories.
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11.5. Stage 5: Marketing of Finished Leather Products
The final stage in the value chain involves marketing the products both in domestic and
international markets. This includes series of activities such as product placement, branding and
packaging and policy initiatives to diversify market and enhance market share. Moreover, this part
of value chain provides a mechanism to accept the rejected products from international market and
to divert it towards local market.
Figure 15. Value Chain Process Map-Leather & Leather Products
Local International
Hide Supply
Live Stock
Market Market
Procurement of Storage for Export

Skin and Hides
Rejected Repairing or
Tanning Process
Reworking
Semi-Processed
• Leather Garments
Wet Blue Leather & Apparels
• Articles of Leather Finished Products
• Gloves
• Footwears
Crusting
Cutting
Finished leather
Sheets Pattern Making Stitching
12. Supply Side Issues

12.1. Challenges Faced by the Leather Industry of Pakistan
Despite experiencing an upward trend in terms of production over the years, the leather industry
is afflicted by a host of external and internal problems causing the exports to decrease. On the
external front high prices of the finished goods, slackness in international demand, and continuous
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market recession in the Euro Zone led to a rapid decline in the international market share. Internally
the industry is facing a host of the challenges including high cost of doing business, ineffective
supply chain, low-skilled human resource, lack of modern technology, and inadequate government
support.
12.1.1. Availability of Raw Materials
The industry was having advantage in availability of raw materials owing to existence of livestock
at large scale in the country. However, the supply of raw material is severely affected due to
smuggling of huge number of live animals to other countries like Afghanistan and Iran.
Consequently, the cost of production escalated. Such trend further causes to deteriorate the
industry’s export performance.
12.1.2. Ineffective Supply Chain
The emerging trend of shirking supply of raw materials is coupled by an inefficient supply chains
resulting in wastage of raw materials. Hides and skins demand a proper and timely treatment to
make them useful for tanning purposes without deteriorating the quality. A large quantity of raw
hides and skins were damaged on the Eid season during fiscal year 2017-18, due to high
temperatures and insufficient preservation alternatives. Moreover, negligence and absence of
technical skills lead to quality deterioration of leather at pre-slaughtering, during slaughtering and
post-slaughtering stages. This has not only negatively impacted the production potential of the
industry but has increased its dependence on import for raw hides.
12.1.3. Suspension of Water Supply
One another factor adding to the cost of doing business is the suspension of water supply to the
leather industry clusters. For instance, the tannery zone of Korangi Industrial Area – where the
major leather and leather goods exporting units exist, is facing this issue which has hinder the
industry to realize its production potential ultimately affecting the exports of leather and leather
products adversely. More recently the government of Sindh has imposed tax on water for industrial
usage @ of Re.1/liter which further has escalated the cost of production.
12.1.4. Cost of Doing Business
The State Bank of Pakistan in its annual report on the state of economy for fiscal year 2017 has
provided a comparison between Pakistan and its regional economies including Bangladesh and
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India for input costs in leather industry. The inputs include electricity, gas and labor. Analysis
reveals that the leather industry of Pakistan is paying 22.22% higher Per KWH in consuming
electricity as compared to India and Bangladesh, while for gas consumption it pays 156.67 %
higher per MMBTU as compared to Bangladesh and 63.83% higher than India. Similarly, in
comparison to Bangladesh and India Pakistan is paying 98.53% and 17.38% higher wages to the
labors working in the leather industry. Table 12 compares the inputs’ cost of the three countries in
the industry.
Table 12. Input Cost in Leather Industry- A Comparison of Pakistan, India, & Bangladesh
Variables Pakistan Bangladesh (%) Higher Pak pays India (%) Higher Pak
then Bangladesh pays then India
Electricity (Per KWH) 0.11 0.09 22.22% 0.09 22.22%
Gas (per MMBTU) 7.7 3 156.67% 4.7 63.83%
Minimum wages (per 135 68 98.53% 115.01 17.38%
month)
Source: SBP-SOE-2017
12.1.5. Human Resource and Technology
The industry’s potential to meet both domestic and international demand is also constrained by
absence of modern technology and shortage of skilled and semi-skilled labors. The technological
gap can be explained by custom duties imposed on the import of machines used in the industry.
12.1.6. Awaiting Export Rebate Funds
As a part of its export-led policies the government of Pakistan is providing export rebates to a
number of sectors including the leather sector. However, system’s ineffectiveness and other factors
are continuously causing delay in payments of these rebates. According to a claim made by the
leather industry over Rs.200 billion worth refunds from the fiscal year 2017 are in pending, which
has adversely affected the cash flows of exporting firms and reinvestments in the business.
12.1.7. High Import Tariffs on Dyes, Chemicals and Organic Surface-Active Agents
Dyes, chemicals and surface-active agents are integral inputs of leather industry for processing
leather into refine products. Around 90% of these inputs are being imported. The import tariff
pattern of these inputs depicts that the tariffs are relatively higher contributing to an increase in the
cost of production. For instance, in case of dyes, Pakistan applies a minimum of 10.2 % and a
maximum of 13.3% import tariffs. Table 13 shows that the top import origins of dyes used in
leather tanning. In case of Chemicals Pakistan has imposes a tariff rate fluctuating between 6.1%
to 9.5 % (See Table 14).
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Table 13. Import Tariffs -Tanning or dyeing extracts- Chapter-32
Import Origin Average tariff (estimated) applied by Pakistan (%)
China 10.3
India 10.2
Germany 13.3
Korea, Republic of 13.3
Switzerland 13.3
Italy 13.3
Spain 13.3
Source: Trade Map
Table 14. Import Tariffs -Chemicals; Chapter-38

Import Origin Average tariff (estimated) applied by Pakistan (%)
China 7.7
USA 9.5
Germany 9.5
India 6.1
Singapore 9.5
Source: Trade Map
Similarly, the import tariffs on the organic surface - active agents used in leather tanning ranges
from 13.3 % to 18.2% (See Table 15). the tariffs imposed on these chemicals, dyes and reactive
agents contribute toward increase the cost of production leading to high prices of the finished
products.
Table 15. Import Tariff-Organic Surface- Active Agents (3402)
Import Origin Average tariff (estimated) applied by Pakistan
(%)
China 13.3
India 12.4
Germany 18.2
Korea, Republic of 18.2
Thailand 18.2
Taipei, Chinese 18.2
United States of America 18.2
Source: Trade Map
12.1.8. Low Value Addition
The industry is lagging behind in terms of product diversification and value addition. Pakistan’s
leather export basket is consisted of semi-finished and intermediate items. Finished products like
suit cases, hand bags, and saddlery items have negligible share in leather exports. In international
trade fairs like Line Apelle fair held in Italy and the All China Leather Exhibition held 2017,
Pakistani leather manufacturers concluded business deals worth million dollars, however, the deals
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mainly involved selling of intermediate items to other countries for further value addition for
instance to China for the production of shoes, garments, and handbags. In contrast to what Pakistan
is doing, the regional competitors including Bangladesh, India, and China have shifted their focus
on high value-added products instead of exporting intermediate leather items.
12.1.9. Lack of Certification, Registration and Absence of Brand
Adding to the other issues confronted by the industry lack of products’ certification, firms’
registration and absence of brand render export to be subdued. The intentional market demands
products’ certification or firms’ registration with an internationally accredited agency or platform
to certify that the products and firms involved in trade do comply with quality, environmental,
health, and safety standards. One of such platforms is the Leather Working Group (LWG)17 which
aims to ensure and promote environmental-compliance in the production of leather commodities
involved in international trade. Top global retailers and brands are relying on LWG to import
leather intermediates and finished goods. LWG has made it mandatory for members to comply
with certain quality and treatment standards (such as installation of Combined Effluent Treatment
Plants (CETP)) so as to limit environmental degradation. At present only three manufacturers from
Pakistan are LWG members, while the registered members from the regional competitors like
China and India and Bangladesh are 76 and 88 and 1 respectively (see figure 17).
Figure 16. LWG Membership-Regional Comparison
100
88
90
80 76
Number of Members
70
60
50
40
30
20
10 1 3
0
Bangladesh Pakistan India China
17
It is a multi-stakeholder international platform, consisting of retailers, manufacturers, chemical companies, and
other related parties involved in the global leather industry.
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13.Government of Pakistan’s Initiatives/Support to the Leather Industry
This section provides details about the initiatives taken by the government of Pakistan to promote
export of the leather sector.
13.1.1. Exemption of 3% Custom Duty
During the fiscal budget 2017-18 the federal government of Pakistan has exempted 3% custom
duty – in placed previously, on a range of inputs for the leather industry. For instance, under Part-
III of the “Fifth Schedule of the Customs Act, 1969”18, import of tanned hides in wet state with
HS Codes 41.01, 41.02, 41.03 excluding 4103.3000 are exempted from the said duty. While under
Part-VII of the said act Ammonium Sulphate (HS Code 3102.2100) is also exempted from the
duty. Furthermore, this provision is also extended to stamping foils under HS Code 3212.1000,
and products registered under the Agriculture Pesticides Ordinance,1971 with HS Code
3808.9170.
13.1.2. Exemption of Additional Custom Duty
The government has also exempted all plant and machinery used in manufactured or production
of goods under Chapter 84 & 85 from additional custom duty @2% notified through “SRO
630(I)/2018”19 dated 24th May 2018.
13.1.3. Reduction in Regulatory Duty on Import of Goods
In addition to the exemption custom and additional custom duty, the federal government reduced
the regulatory duty on import of inputs for the leather industry from 10% to 5% via “SRO
640(I)/2018”20 dated 24th May 2018. While it has maintained the regulatory duty – in fact a higher
one, on imports of finished products including 20% on trunks and different type of cases of leather
or composition of leather, 50% on articles of apparel of leather, 35% on footwear and 15% on
other products of leather. The detail description is provided in the table below.
18
http://www.fbr.gov.pk/Budget2017-18/Tariff/FifthSchedule.pdf
19
https://www.fbr.gov.pk/Customs-SROs-Import
20
https://www.fbr.gov.pk/DislpaySRO/6348
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Figure 17. Regulatory Duty on Leather Industry Inputs and Finished Products
PCT Code Product Description Regulatory Duty
3402.1190 Other (Leather Decreasing Agent) Reduced to 5% from 10%
3402.1220 Other Than in retail Packing Reduced to 5% from 10%
3402.1290 Other (Leather Decreasing Agent) Reduced to 5% from 10%
3402.1300 Non-Ionic Reduced to 5% from 10%
3402.9000 Other (Leather Decreasing Agent) Reduced to 25% from
35%
42.02 Trunks, Suit cases, Vanity-cases, Briefcases, school satchels, 20%
Camera cases, musical instrument cases, travelling bags, insulated
food or beverages bags, toilet bags, rucksacks, handbags, shopping-
bags, wallets, purposes, map-cases, cigarette-cases, jewelry boxes,
powder boxes, cutlery cases and similar containers, of leather or of
composition leather, of sheeting of plastics, of textile materials, of
vulcanized fibre or of paperboard
42.03 Articles of Apparel and clothing accessories, of 50%
leather or composition leather
64.03 Footwear with outer soles of rubber, plastics, leather or 15%
Composition leather and uppers of leather (except PCT 6403.9900)
6403.9900 Other 35%
64.04 Footwear with outer soles of rubber, plastics, leather or composition 35%
leather and uppers of textile materials
Source: FBR-SRO 640(I)/2018
13.1.4. Drawback on Local Taxes & Levies on Finished Leather
The leather industry is further facilitated by the federal government through provision of drawback
on local taxes via “SRO, 711(l)/2018”21 dated 8th June 2018. The drawback under this order is
provided for the shipments made from the 1st July 2018 till the 30th June 2021 (both days
inclusive). Following table provide detail of the drawback rates for leather products.
Figure 18. Drawback Rates of Leather Products
Chapter/Sub-headings/ PCT codes Description Drawback Rates
(Specified)
40151.110, 4015.1900, 4203.2100, Gloves of leather or leather composition 3%
4203.2910, 4203.2920, 4203.2930,
4203.2990,
4203 Leather Garments, including articles of 4%
leather and manufactures thereof
4201, 4202, 4205 other Leather Manufactures 3%
64 Footwear 3%
Source: FBR-SRO 711(I)/2018
21
http://www.commerce.gov.pk/wp-content/uploads/2018/06/SRO.pdf
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13.2. TDAP’s Initiatives
As a part of it marketing initiatives, TDAP has inculcated fifteen international trade fairs for leather
and leather products in its annual exhibition calendar for the year 2018. Out of these, eight fairs
were allocated to PTA with provision of 40% subsidy on space and construction for organizing
Pakistan pavilion in various destinations. Similarly, for the year 2019 the same number of
exhibitions are dedicated for leather and leather products’ marketing in international markets (see
table 20). Among these fairs again eight are allocated to PTA (see table 21).
Figure 19. TDAP’s International Trade-Fairs-2019-Leather & Leather Products

Sr. Details of Event Date Products
No
1 APLF Fashion Access, Hong Kong April, 2019 Leather Garments
2 Istanbul Leather Fair Turkey October 2019 Leather & its Products
3 International Shoes and Leather Exhibition July, 2019 Leather Products
and International Footwear and products
Exhibition, Vietnam
4 Sourcing at Magic, Las Vegas, USA February, 2019 Apparel, Knitwear, Leather,
Sportswear
5 AIM Expo USA October 2019 Leather & Leather Apparels
6 Mipel The Big Show, Italy September, 2019 Leather
7 EXPO Protection, Paris France November 2019 Leather and Protective gears
Source: TDAP; https://www.tdap.gov.pk/international_exhibitions.php
Figure 20. TDAP International Trade-Fairs-2019-Leather & Leather Products-Allocated to PTA

Sr. Details of Event Date Products
No
1 ACLE, Shanghai, China Nov, 2019 Leather
2 Indo Leather and Footwear, Indonesia Apr, 2019 Leather Products
3 Leather Tech Show, Bangladesh Nov, 2019 Leather Products
4 MMT Section of APLF, Hong Kong Mar, 2019 Leather
5 Premier Vision, Paris France Feb, 2019 Leather & its product
6 Lineapelle Fair, Bologna Italy Feb, 2019 Shoes
7 Premier Vision, Paris France Sep, 2019 Leather & its product
8 Lineapelle Fair, Bologna Italy Oct, 2019 Leather & its product
Source: TDAP; https://www.tdap.gov.pk/international_exhibitions.php
Moreover, at domestic level the Ministry of Commerce and TDAP support PTA in holding
Pakistan Mega Leather Show every year in January. This provides Pakistani exporters to exhibit
the finest quality of leather & leather products, leather footwear, machinery, components,
chemicals and accessories to break a business deal with foreign buyers.
42 | P a g e
14.SWOT Analysis:
This section provides the assesses the leather industry t of the by through SWOT analysis by
keeping view both internal and external factors.
Strengths:
• Availability of raw materials locally.
• Large number of tanneries.
• Government policies facilitate exports i.e. exemption of custom duty and additional custom
duty on raw materials import, provision of drawback on local taxes by federal government
on exports of finished leather products around 3 to 4%.
Weakness:
• Ineffective supply chain leading to quality deterioration of raw hides and skin.
• Cost of doing business leading to high cost of production for example utilities’ cost are
higher as compared to regional competitors.
• Limited energy efficient and environment friendly technologies and plants.
• Lack of skilled human resource.
• Good quality leather is mostly exported and is not available for value addition.
• Lagging behind in terms of product diversification and value addition.
• Lack of products’ certification, firms’ registration with international agencies for quality
control in addition to absence of brand names.
Opportunities:
• There exist a room to utilize existing capacity in the sector- as Pakistan has around 2500
tanneries which can be atomized to enhance the production.
• Effective supply chain can further improve raw materials availability.
• There is huge opportunity to diversify export basket by enhancing export of hang bags,
travelling bags, suit cases, and footwears.
• Shifting to artificial leather can further open new avenues to cater the rising needs of
automotive and footwear industries in the emerging markets of Asia Pacific.
43 | P a g e
Threats:
• A supply of raw hides and skin may encounter a shortage in future leading to escalation in
input cost because of live animals are being smuggled to neighboring countries.
• The industry is awaiting export rebates for years. If the trend persist the industry will be
badly affected in absence of working capital.
• Imposition of water tax by Sindh government can affect leather industry output.
• High import tariffs on dyes, chemicals and organic surface-active agents if continued will
add up to the cost of production.
• Regional competitors like India, and Bangladesh have comparative advantages in terms of
cost of doing business.
• The regional competitors including Bangladesh, India, and China have shifted their focus
on high value-added products instead of exporting intermediate leather items.
• Compliance with new environmental regulations may not be cost effective for infant firms
in the industry.
44 | P a g e
15. Conclusion and Recommendations
Pakistan’s existing leather export basket is dominated by articles of apparel of leather, gloves,
mitten, sports gloves, grain split leather of bovines, and tanned leather of goats and it has captured
a sizeable share in the existing global imports for these products, however, these product fall at
lower end of global leather demand as reflected by their low share in in global leather imports.
Majority of the Pakistan’s leather exports at HS 6-digit noted to have a negative AAGR form 2013
over 2017, and the same trend is recorded for global exports of these products, which shows that
contract in global exports affected Pakistan’s exports as well.
On the bases of comparative analysis of Pakistan’s competitors in leather exports, global import
trend analysis, evaluation of challenges face by the industry domestically as well as on export
front, this study makes following recommendations.
• There is a need to diversify the leather export basket as most of the leather products we are
exporting at HS 6-digit are being imported least globally. This can be achieved by adding
sports footwear - 640411, hand bags - 420221, footwear with outer soles of textile materials -
640419, and trunks, suitcases, vanity cases -420212 to the export basket. These products set a
direction for Pakistan to earn from exports in the leather sector as they are high in demand
globally with annual growth rate greater than 5%.
• The global leather industry is shifting from pure leather to PU leather for which global demand
is increasing. Pakistan’s export of the PU leather products is negligible. Therefore, the
production and export of PU leather and its products needs attention. Products like plates,
sheets, film, foil and strip, of plastics, reinforced, laminated – 392, articles of plastics and
articles of polymers of ethylene, natural polymers – 3926, nonwovens, whether or not
impregnated, coated, covered or laminated – 5603, textile fabrics impregnated, coated,
covered or laminated with plastics – 5903 can be added to the leather export basket.
• To ensure easy procurement of raw material there is need to address the smuggling of live
animals to the neighboring countries of Iran and Afghanistan. It is also identified that, lack of
efficient mechanism to preserve the hides is causing deterioration in the quality raw hides.
Furthermore, it also necessary to technically equip labors at pre-slaughtering, during
45 | P a g e
slaughtering and post-slaughtering stages to avoid industry’s dependence on import for quality
raw hides.
• Tanneries need to be upgraded with CETPs which are also mandatory for registration and
certification from international accredited agencies. Government may provide subsidy to the
industry for installation of CETPs.
• To reduce cost of doing business in leather sector and to maintain price competitive in the
global leather market, Pakistan should rationalize custom duty on the import of raw materials
for leather industry including organic surface- active agents – chapter 34, chemicals under –
chapter 38, and tanning or dyeing extracts under – chapter 32.
• The imposition of water tax for industrial usage by the government of Sindh @ of Re.1/liter
is adding to the cost of doing business which needs to be addressed.
46 | P a g e
References
1. European Chemical Agency. (n.d.). Retrieved May 02, 2019, from
https://echa.europa.eu/documents/10162/23665416/rest_cvi_leather_opinion_rac_10750
_en.pdf/e55bb713-4100-018b-ac13-ad1070658e75
2. (2017). 7 Tales of Italian Leather- Sustainability Report 2017. Milan: UNIC (Italian
Tanners’ Association) .
3. Convention on International Trade in Endangered Species (CITES). (n.d.). Retrieved May

02, 2019, from https://www.cites.org/eng/disc/what.php
4. Council for Leather Export, Ministry of Commerce and Industry, Govt. of India. (n.d.).
Retrieved from http://leatherindia.org/)
5. Federal Board of Revenue. (n.d.). Retrieved March 25, 2019, from

http://www.fbr.gov.pk/Budget2017-18/Tariff/FifthSchedule.pdf
6. Ferderal Board of Revenue-SROs. (n.d.). Retrieved March 12, 2019, from

https://www.fbr.gov.pk/Customs-SROs-Import
7. Global Value Chain Initiative-Duke University. (n.d.). Retrieved March 20, 201, from
https://globalvaluechains.org/concept-tools
8. Gonca Telli Yamamoto, Ö. Ş. (2011). Marketing Activities in the Leather

Industry:Comparative Country Analysis. International Journal of Economics and
Management Sciences, 37-98.
9. Government of India Ministry of Commerce & Industry, Department of Industrial Policy

& Promotion. (n.d.). Retrieved Faburary 08, 2019, from https://dipp.gov.in/
10. Indian Trade Promotion Organization. (n.d.). Retrieved Feburary 04, 2019, from
http://indiatradefair.com/knowledge/details/abroad18-19/abroad_sideba
11. (2015). Intraregional Trade in Leather and Leather Products in South Asia: Identification
of Potential Regional Supply Chains. Delhi, India: Asian Development Bank.
12. (2017). Italy: “Industria 4.0”. Digital Transformation Monitor.
47 | P a g e
13. Ministry of Commerce, Government of Pakistan. (n.d.). Retrieved March 12, 2019, from
http://www.commerce.gov.pk/wp-content/uploads/2018/06/SRO.pdf
14. Pakistan Tanners Association (PTA). (n.d.). Retrieved Feburary 22, 2019, from
http://www.pakistantanners.org
15. (2017). The Italian Leather Goods Industry: Preliminary Results for 2017. Milan:
AIMPES.
16. Trade Development Authority of Pakistan. (n.d.). Retrieved Feburary 18, 2019, from
https://www.tdap.gov.pk/international_exhibitions.php
48 | P a g e
Appendix
Table 16. Pakistan's Top Leather Exports Values in USD Million
Produc Product label Pakistan's Leather Exports to World Share in Global Share in Pakistan's
t code Pak Imports Global Export Share in
2013 2014 2015 2016 2017
Leather 2017 Leather Global Imports
Exports Imports 2017 2017
2017
Leather Sector 1,382.76 1,422.57 1,230.12 1,102.63 1,067.12 240,228.87 0.44%
'420310 Articles of apparel, of leather or composition leather 385.10 378.66 320.98 297.99 275.58 25.83% 2,947.71 1.23% 9.35%
(excluding clothing accessories, footwear)
'420329 Gloves, mittens and mitts, of leather or composition leather 189.24 210.56 201.51 187.62 196.40 18.40% 1,567.26 0.65% 12.53%
(excluding special sports gloves)
'410712 Grain splits leather "incl. parchment-dressed leather", of 106.66 120.58 120.46 115.99 114.40 10.72% 3,719.07 1.55% 3.08%
the whole hides and skins of bovine
'420321 Specially designed gloves for use in sport, of leather or 110.98 102.49 107.12 100.34 102.21 9.58% 458.26 0.19% 22.30%
composition leather
'411310 Leather further prepared after tanning or crusting "incl. 158.95 141.66 121.91 97.45 82.98 7.78% 598.89 0.25% 13.86%
parchment-dressed leather", of goats
'640399 Footwear with outer soles of rubber, plastics or 74.61 77.54 74.26 69.02 68.99 6.47% 26,957.99 11.22% 0.26%
'410792 Grain splits leather "incl. parchment-dressed leather", of 76.65 79.76 60.62 56.92 50.70 4.75% 2,716.71 1.13% 1.87%
the portions, strips or sheets of
'411390 Leather further prepared after tanning or crusting "incl. 78.43 88.82 28.94 31.85 36.68 3.44% 205.31 0.09% 17.87%
parchment-dressed leather", of antelopes
'411200 Leather further prepared after tanning or crusting incl. 53.48 45.38 33.70 25.09 32.26 3.02% 627.67 0.26% 5.14%
parchment-dressed leather", of sheep
'420219 Trunks, suitcases, vanity cases, executive-cases, briefcases, 0.81 0.68 0.67 0.76 17.16 1.61% 619.77 0.26% 2.77%
school satchels and similar containers
'410449 Hides and skins of bovine "incl. buffalo" or equine 7.73 10.23 12.55 10.86 14.18 1.33% 638.11 0.27% 2.22%
animals, in the dry state "crust", without
'640320 Footwear with outer soles of leather, and uppers which 8.13 27.15 12.45 13.58 11.62 1.09% 158.64 0.07% 7.33%
consist of leather straps
'640590 Footwear with outer soles of rubber or plastics, with uppers 8.59 9.29 11.20 11.62 8.68 0.81% 2,108.98 0.88% 0.41%
other than rubber, plastics, leather
'420100 Saddlery and harness for any animal, incl. traces, leads, 7.78 9.63 7.74 9.45 8.68 0.81% 1,553.97 0.65% 0.56%
knee pads, muzzles, saddle cloths
'420330 Belts and bandoliers, of leather or composition leather 6.01 7.91 6.93 8.69 7.77 0.73% 2,175.41 0.91% 0.36%
Source: Trade Map
49 | P a g e
Table 17. World Top Leather Exports Values in USD Million
Product Product label 2014 2015 2016 2017
code
Leather Sector 266,090.54 248,482.79 236,452.86 252,325.69
'640399 Footwear with outer soles of rubber, plastics or composition leather, with uppers of leather 29,343.68 26,526.14 24,841.18 26,356.54
'640299 Footwear with outer soles and uppers of rubber or plastics (excluding covering the ankle 29,385.68 27,390.32 25,256.47 26,010.93
'640419 Footwear with outer soles of rubber or plastics and uppers of textile materials 17,979.27 19,593.98 20,211.02 23,412.13
'640411 Sports footwear, incl. tennis shoes, basketball shoes, gym shoes, training shoes 8,275.48 9,515.26 11,956.58 13,996.72
'420221 Handbags, whether or not with shoulder straps, incl. those without handles 13,253.96 12,771.84 12,532.04 13,896.80
'420292 Travelling-bags, insulated food or beverage bags, toilet bags, rucksacks, shopping-bags, map- 10,209.19 10,513.87 10,322.30 11,805.49
cases
'420212 Trunks, suitcases, vanity cases, executive-cases, briefcases, school satchels and similar containers 12,541.01 12,518.79 12,016.89 12,742.28
'420222 Handbags, whether or not with shoulder straps, incl. those without handles 11,922.13 11,890.36 11,060.90 11,958.33
'640391 Footwear with outer soles of rubber, plastics or composition leather, with uppers of leather 13,340.67 11,153.99 10,952.27 11,555.19
'430310 Articles of apparel and clothing accessories of furskin (excluding gloves made of leather 4,533.98 3,503.34 3,831.50 4,260.56
'420231 Wallets, purses, key-pouches, cigarette-cases, tobacco-pouches and similar articles 4,811.42 4,500.43 4,369.72 4,670.27
'640359 Footwear with outer soles and uppers of leather (excluding covering the ankle 6,019.43 4,966.51 4,636.31 4,723.77
'640291 Footwear covering the ankle, with outer soles and uppers of rubber or plastics 4,196.24 3,743.05 3,893.13 4,078.83
'410712 Grain splits leather "incl. parchment-dressed leather", of the whole hides and skins of bovine 5,406.12 4,748.46 4,528.34 4,489.36
'420232 Wallets, purses, key-pouches, cigarette-cases, tobacco-pouches 3,544.35 3,674.86 3,785.88 3,945.84
Source: Trade Map
50 | P a g e
Table 18. Major World Imports- Synthetic Leather Values in USD Million
Product Product label 2013 2014 2015 2016 2017
code
'392190 Plates, sheets, film, foil and strip, of plastics, 14,142.54 14,452.09 13,295.48 13,485.79 14,735.12
reinforced, laminated, supported or similarly ...
'590320 Textile fabrics impregnated, coated, covered or 3,859.87 4,115.88 3,730.72 3,854.16 4,111.35
laminated with polyurethane (excluding wallcoverings
...
'392620 Articles of apparel and clothing accessories produced 4,220.66 4,303.02 4,079.74 3,787.14 4,343.33
by the stitching or sticking together ...
'392113 Plates, sheets, film, foil and strip, of cellular 3,949.56 4,025.18 3,578.48 3,677.66 4,114.38
polyurethanes, unworked or merely surface-worked ...
'392119 Plates, sheets, film, foil and strip, of cellular plastic, 3,112.46 3,360.80 3,290.05 3,343.49 3,635.04
unworked or merely surface-worked ...
laminated with plastics other than poly"vinyl ...
laminated with poly"vinyl chloride" (excluding ...
'560311 Nonwovens, whether or not impregnated, coated, 2,275.18 2,415.02 2,279.44 2,252.56 2,418.43
covered or laminated, n.e.s., of synthetic or ...
covered or laminated, n.e.s., of man-made filaments, ...
'392112 Plates, sheets, film, foil and strip, of cellular polymers 1,864.21 1,962.72 1,920.61 1,969.33 2,072.61
of vinyl chloride, unworked or merely ...
covered or laminated, n.e.s., weighing > 25 ...
covered or laminated, n.e.s., of man-made filaments, ...
covered or laminated, n.e.s., weighing > than ...
Source: Trade Map
51 | P a g e
Table 19. Synthetic Leather Exports at HS 6-Digit-Pakistan Values in USD Million
Code Product label Exported Exported Exported Exported Exported
value in value in value in 2015 value in 2016 value in
2013 2014 2017
'590390 Textile fabrics impregnated, coated, covered or laminated with 2.05 1.70 0.82 1.47 0.41
plastics other than poly"vinyl ...
polyurethane (excluding wallcoverings ...
'392190 Plates, sheets, film, foil and strip, of plastics, reinforced, laminated, 0.50 0.28 0.12 0.15 0.33
supported or similarly ...
poly"vinyl chloride" (excluding ...
'392119 Plates, sheets, film, foil and strip, of cellular plastic, unworked or 0.19 0.20 0.13 0.18 0.05
merely surface-worked ...
'392113 Plates, sheets, film, foil and strip, of cellular polyurethanes, unworked 0.02 0.01 0.03 0.03 0.11
or merely surface-worked ...
'560313 Nonwovens, whether or not impregnated, coated, covered or 0.02 0.05 0.09 0.04 0.01
laminated, n.e.s., of man-made filaments, ...
'392112 Plates, sheets, film, foil and strip, of cellular polymers of vinyl 0.14 0.00 0.13 0.21 0.11
chloride, unworked or merely ...
'392620 Articles of apparel and clothing accessories produced by the stitching 0.40 0.40 0.24 0.16 0.11
or sticking together ...
laminated, n.e.s., of synthetic or ...
laminated, n.e.s., weighing > 25 ...
laminated, n.e.s., weighing > than ...
laminated, n.e.s., weighing > 70 ...
laminated, n.e.s., of man-made filaments, ...
Source: Trade Map
52 | P a g e

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Product Report

LEATHER AND LEATHER PRODUCTS

AHMAD KHAN RESEARCH ASSOCIATE

Trade Development Authority of Pakistan

AAGR Average Annual Growth Rate

Table 1. Pakistan Leather Industry - Production ............................................................................ 2

Figure 1. Leather Industry Cluster Locations- Number of Registered Units .................................. 2

2. Leather and Leather products’ Description ............................................................................. 3

3. Export Overview Pakistan’s Leather Sector ............................................................................ 4

4. Pakistan’s Leather Export Composition at HS Code 2-Digit .................................................. 5

5. Pakistan’s Top Leather Exports- HS Code 6-Digit ................................................................. 7

6. Pakistan’s Top Export Destinations for Leather and Leather Products................................. 11

7. Potential Products, Potential Markets’ Identification and Analysis ...................................... 12

7.1. Pakistan’s Potential Exports in the Leather Sector ........................................................ 13

7.1.1. Potential Markets for Export of Articles of Apparel of Leather or composition of

8. Global Leather Trade Scenario .............................................................................................. 16

9.1. Global Top Importers of Leather Products ........................................................................ 18

9.2. Global Top Exporters of Leather Products ........................................................................ 19

9.3. Global Trend of Leather Exports at HS 6-Digit ................................................................. 19

9.4. Global Trade Trend for Synthetic Leather ......................................................................... 22

9. Competitors’ Export Strategies ............................................................................................. 24

9.1. Italy’s Strategy ............................................................................................................... 24

9.2. India’s Strategy .............................................................................................................. 26

9.4. Vietnam’s Strategy ......................................................................................................... 29

10. Non-Tariff Barriers ............................................................................................................ 30

10.1. Certifications .............................................................................................................. 30

10.1.1. OEKO-TEX Leather Standard ................................................................................ 30

10.1.2. Leather Working Group (LWG) Registration......................................................... 31

10.1.3. Eco-Labelling .......................................................................................................... 31

10.2. Chemical Requirements .............................................................................................. 31

10.3. Convention on International Trade in Endangered Species (CITES) ......................... 32

10.4. Other Requirements .................................................................................................... 32

11. Value Chain Analysis for Leather and Leather Products................................................... 32

11.1. Stage 1: Hide Supply .................................................................................................. 33

11.2. Stage 2: Semi-processed hides- Finished Leather Sheets ........................................... 34

11.3. Stage3: Finished Leather Sheets ................................................................................. 34

11.4. Stage 4: Finished Leather Products ............................................................................ 34

11.5. Stage 5: Marketing of Finished Leather Products ...................................................... 35

12. Supply Side Issues ............................................................................................................. 35

12.1. Challenges Faced by the Leather Industry of Pakistan............................................... 35

12.1.1. Availability of Raw Materials ................................................................................. 36

12.1.2. Ineffective Supply Chain ........................................................................................ 36

12.1.3. Suspension of Water Supply ................................................................................... 36

12.1.4. Cost of Doing Business ........................................................................................... 36

12.1.5. Human Resource and Technology .......................................................................... 37

12.1.6. Awaiting Export Rebate Funds ............................................................................... 37

12.1.9. Lack of Certification, Registration and Absence of Brand ..................................... 39

13. Government of Pakistan’s Initiatives/Support to the Leather Industry .......................... 40

13.1.1. Exemption of 3% Custom Duty.................................................................................. 40

13.1.2. Exemption of Additional Custom Duty ...................................................................... 40

13.1.3. Reduction in Regulatory Duty on Import of Goods ................................................... 40

13.1.4. Drawback on Local Taxes & Levies on Finished Leather ......................................... 41

13.2. TDAP’s Initiatives ...................................................................................................... 42

14. SWOT Analysis: ................................................................................................................ 43

15. Conclusion and Recommendations .................................................................................... 45

• Chapter 41-Raw Hides

A description of the above-mentioned chapters is provided in the following table.

3. Export Overview Pakistan’s Leather Sector

Figure 2. Leather Sector Exports of Pakistan