Overview

 In 1947, there were a few tanneries

operating on a small scale producing sole
leather.

 In 1950·s tanneries were set up at Karachi

and Lahore

 1960·s and 70·s marked the establishment of tanneries

at Hyderabad, Kasur, Multan, Sialkot, Sahiwal and
Gujranwala.
Leather Industry Today
 Today, the leather tanneries are divided into two sectors ²
organized and unorganized sector

 700 units in total ² 450 units in the unorganized sector

and 250 units are members of organized sector
 The tannery units in the unorganized sector producing
leather on cottage basis, with negligible use of machinery

 These are concentrated in the form of clusters

-Kasur has 275 tanneries
-Sialkot houses 250 tanneries
-Karachi has around 150 tanneries
 The Pakistan Leather Industry started with the production
of pickled and vegetable tanned hides and skins.

 Today we produce not only wet blue and crust forms of

leather but we also produce fully finished leather and
leather based products
-Such as jackets, belts, gloves and footwear
 The industry plays a pivotal role in stimulating export
volumes
- In 2007-2008, the industry achieved exports of
worth US$ 1.22 billion, registering an increase 21%
when compared to the previous year

 Export of finished leather increased 26% in terms of

quantity and 16% in terms of value in the year 2007-08
 The major export partners are:
 |
European community(accounts
for 65% of the total exports) 
North and Latin American 

countries as well as Central Asian
states(contributing 35% of total R
exports) 

 Pakistan has 1% share of the world 


leather market.
|
R
 This is a reflection of the
deteriorating situation our leather
industry is in.
Leather associations in Pakistan

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 Model used: Porter·s Diamond model

 Research methodology used:

a Published data

a Primary research conducted at

Nova leathers Pvt. Ltd
Omar Leathers Pvt. Ltd
Noor Leathers
Shafi tanners and co.
Mehmood Brothers tanners and manufacturers
Prime tanners Pvt Ltd.
Blooming Leather Pvt. Ltd
KHAS Pvt.Ltd
Pakistan Tanners Association
National Institute of Leather Technology
 Úactor conditions
Raw material
 The basic raw material used are the hides
and skins of ovine and bovine animals.

 The word skin is used for small animals or

´ovineµ(sheep and goat)

 The word hide is used for bigger animals

´bovineµ(buffalos and cows)
Category-wise usage of the hides and skins:
 Cow hide and sheep skin is mostly used for smooth
finishes of the upper sole of shoes, inner side of gloves
and designer bags and clothing

 Buffalo hides and goat skin are used in coarser items like
leather soles and joints

Tanning methods used:

 Vegetable-tanning ² uses ¶tannin·

 Chrome-tanning ² uses salt compound of chromium
 Buffalo and cow skins mostly come from
Punjab, while goat and sheep is of much better
quality in Sindh.

 Interestingly enough we import around 70-80% of

hides and skins from Europe, Africa and Middle-east.

 Locally, tanners usually procures the raw material

from slaughter colonies(kamelas) situated in the
outskirts of various cities
 The leather tanneries purchase quite a lot of the hides
and skins during Eid-ul-Azha (some of them stock raw
materials for the 4-5 months of usage)

 The local slaughtering is mainly done by unprofessional

slaughterers during Eid-ul-Azha

 This results in a lot of unnecessary cuts that decreases the

net worth of the raw material or at times renders the skin
useless.
 Hides and skins are perishable items. They start
rotting soon due to the flesh and blood residue.

 Local slaughterers do not have state-of-the art

preservation houses and they use the traditional
method of ´saltingµ to preserve the skin.
 LIVESTOCK POPULATION IN PAKISTAN
(2001-02 TO 2007-08)

Million Numbers
Ú
 Cattle Buffalos Sheep Goats 


      0.8

     0.8

     0.7

     0.7

     0.9

     0.9

      1.0

 Dyes and Chemicals
 90% of the dyes and chemicals used in
the tanning of leather are imported
mainly from
Germany
Spain
Italy

 10% dyes and chemicals are taken from

MNCs which have got their set ups in
Pakistan
Sandoz
Bayer
BASÚ
Clariant
 The proportion of imported to local dyes is very high
because of the poor quality of dyes and the
restrictions
(regarding the usage of certain chemicals in the
manufacture of dyes) by international buyers.
 Labour
 The leather industry provides employment to 200,000
people of Pakistan

 Almost 80% of the labour is skilled( they have the required

expertise to operate the machinery)

 Approximately 20% are the unskilled workers who are

basically helpers( they help in unloading, loading and
packaging)

 Apart from this there are around 15 to 20% graduated ,

engineers and diploma holders In the big players of the
industry.

 The smaller tanneries have 2 to 5% of graduates in their

workforce
 Almost all the tanneries have the minimum age requirement of 18
years, below which they do not employ the candidate

 Basic training methodology prevalent is the ´Ustaad-shaagird ´

method

 The tanneries we visited have not conducted any sort of workshops

or skill development programs for their workers over the past two
years

 They believe that the expertise that the workers have is sufficient
enough to meet the buyer preferences

 Our leather industry is facing the same problems as the other

industries in Pakistan, which is the lack of interest of today·s literate
class to opt for working in these industries
 Training institutes:

 There are various training institutes that have been

established to provide leather based academic degrees.
Some of them are:

National institute of Leather Technology, Karachi(NILT)

Leather products development institute, Sialkot(LPDI)
Institute of Leather Technology, Gujranwala(ILT)
Pakistan Institute of Úashion Design, Lahore(PIÚD)
Úootwear training institute, Charsadda(ÚTI)
Úacility cum Training centre, Kasur
Cleaner Production centre, Kasur
 There are various programs that NILT is offering in
order to impart Leather related knowledge. Some of
them are:

Diploma of Associate Engineering(DAE)

Diploma in Leather Technology
Diploma in Leather garments
Diploma in Leather goods

 NILT has fully fledged mini tannery, Physical, Chemical and

Analytical Laboratories, Information Technology Centre, a good
Library, Research & Design Laboratories with other essential
facilities which is catering to the needs of upgrading the leather
sector
Capital and Machinery

 Around 80 to 95% of machinery is imported from countries like

Italy and Úrance

 The high percentage of import in terms of machinery is a reflection

of the insignificant manufacturing base in Pakistan.

 Around 5 to 10% machinery used by the small tanneries is locally

produced. Such machinery is locally known as chukrum.

 These are smaller in size and available at reasonable prices.

Research & Development:
 There are numerous institutes related to leather, yet the rate at
which research and development is being carried out is very
slow and is in it·s initial stages

 Our primary research showed that only big players of the

industry such as Nova leathers and Mhmood Brothers have
come up with a new dyeing technology(steel dyeing drums)
which ensure better quality of dyeing.

 The university of veterinary and animal sciences(UVAS), Lahore

and PTA have signed a research project for the identification of
skin diseases in animals and geographical patterns of these
diseases.
Infrastructure:
 There are severe infrastructure
problems faced by the Leather
industry.

 The industrial hub of Karachi, Korangi

Industrial Area (sector 7-A) does not
have a single metal road. These
tanneries are also deprived of the basic
utilities(such as water and electricity).

 Being a water-based industry, tanneries

have to purchase water and they have
also arranged for company-owned
generators to ensure uninterrupted
power supply.

 The drainage system is in a very poor

condition as well.
 Demand Conditions
Climatic conditions:

‡ The demand of Leather is highly dependant on natural

factors such as climate

‡ Pakistan lies in the temperate zone, the climate is

generally arid, characterized by hot summers and cool
winters. There are also wide variations between extremes
of temperature at various locations.

‡ The demand can still be created by focusing more on the

products which are not affected by the climate.
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 Global Demand for Leather
Products
Product Profile



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Absence of commercial farming:

‡ In Pakistan, 65% of the population resides in rural areas.

‡ The inhabitants of these areas do not take care of animals

in a professional manner

‡ Animals become victims of wobble fly disease and skin

rash.
Country Image and Price:
 70% of tanneries that we visited mentioned that the
major impediment in the growth of the Leather industry
is the unfavorable image Pakistan has in the international
arena.

 We identified 4 factors that are significant for the

development of any industry, that are:
Country image
Logistics
Price
Quality

 In Pakistan, we gave minor attention to these four

aspects which are otherwise essentials for success.
 The law and order situation is making
foreign investors reluctant to invest

 Even the hoteling facilities and country

ambience is not up to the standards
Animal activists:

 A recent culture shift has been observed, due to which

people are becoming more and more conscious about
the environment and extinction of animal life

 There have been recent activist movements such as the

one by Pamela Anderson and the Chetus organization
Livestock Industry:

 In Pakistan, we regard the meat industry to be of prime

importance, Leather is just seen as a by-product.

 This perspective needs to be changed for the

sophistication of local demand
 Effluent treatment plant & REACH
agreement
 This plant has been made in
Korangi with the collaboration of
Dutch government.

 Certifications of social compliance

and standardization for the use of
chemicals.
 Related & supporting
Industries
Úashion Industry:
 The fashion industry of Pakistan is not up to the
standards.

 There is lack of awareness among the masses regarding

the latest trends in fashion

 If the fashion industry flourishes and creates awareness

about its products, the leather industry will get a boost
as more and more people will be inclined to buy
leather based products(such as belts and bags)
 Úilm Industry:

 Pakistan·s film industry is almost non-existent.

 Over the years, India·s clothing industry has

prospered due to the fact that its film industry has
been progressing at an amazing rate, and that makes
Indiaa one of our major competitors.
Úeed Industry:

 In the process of tanning, leather passes through the

shaving process in which a lot of wastage(burada type) is
gathered

 This wastage is then sent to the feed industry where it is

used in the manufacture of animal feed.
 Soap Industry:

 During the fleshing stage, the access fat is removed from

the animal skin.

 This fat is used in the manufacture of low-grade soaps

 Machinery:

90% of the machinery used in the leather industry is

imported from countries like Italy and Úrance.

Our local manufacturing base is insignificant and no

conscious effort is being made to locally produce low
priced and good quality machines.
 Banking and finance industry:
The credit availibilty to the leather tanneries is an on
going issue.

The borrowing cost is high which deters further

investment in the industry.

The initiative taken by the government to reduce the

Bank·s spread from 3% to 2% ( in 06-07) can help the
industry grow.
 Livestock Industry
 Livestock provides the most important raw material to the Leather
industry, therefore the quality and quantity of livestock available
matters a lot.

 Severe need to commercialize livestock farming in order to breed

healthy animals for provision of quality hides and skins.

 Hides and skins are worth more money and can have more value-
addition done to them therefore, this should be focused as a
primary product rather than a secondary product of the meat
industry.
Dyes and chemicals

 Our local chemical and dye manufacturing is not

supporting the Leather industry, as apart from a few
MNCs mentioned earlier, none of the companies meet
the international standards.

 Our local chemical and dyes should address various

health issues associated with the chemicals they produce
in order to abide by all the set international regulations.
  Training, research and educational
institutes
 The institutes(already mentioned in the factor
conditions) are not working to their full capacity due
to the lack of students, faculty, proper academic
curriculum.

 The NILT has taken initiatives to train individuals in

Leather and Leather products but they are not
capable of attracting people, which is reflected in the
minute number of the present class at the
institute(currently 110)
 Úirm structure, strategy and
rivalry
Structure:
 Divided into two subsectors ²
organized and unorganized sector



&!"#
 700 units in total ² 450 units in the
unorganized sector and 250 units
are members of organized sector  '
!  '
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 The unorganized sector has retailers

in the area of in Joria Bazaar and
Zainab market.
 The associations of leather in Pakistan are:
Pakistan garments association(PLGMEA)
Pakistan tanners association(PTA)
Pakistan footwear association(PÚMA)
Pakistan gloves association(PGMEA)
 The Pakistan tanners association fully represents the
tanneries all over Pakistan, and has represented the
issues of its member exporters at the federal level for
consideration

 Pakistan Tanners Association central sub committees

are also in touch with SMEDA to discuss some
relevant issues of the leather industry towards to the
formulation of the leather vision.
Clusters formation
 The organized sector is mainly
concentrated in the main hubs of the
Country ² Karachi, Lahore and
Sialkot.

 Other towns having leather

industries are:

Hyderabad, Multan, Sahiwal, Kasur,

Sheikhupura, Gujranwala, and
Peshawar

 In Karachi Korangi industrial area an

informal cluster of tanners has
emerged.
 Informal Cluster: Korangi Industrial Area
(Sector 7A)

 This cluster comprises of not only over 150 tanneries but

also an effluent treatment plant, National Institute of
Leather and southern zone office of Pakistan Tanners
Association. The tanneries residing over here are all
export oriented .

 Apart from these 150 tanneries we have a few scattered

units in Sher Shah and SITE
Informal Cluster: Kasur

 Apart from this we also have a cluster in Kasur, in this

cluster there are mostly unorganized and unregistered
tanneries.
 There are 275 tanneries in total
 Average daily input is 190 tons of wet salted weight
 The units tend to provide hides and skins up to the
wet blue form only.
 The structure of industries in Kasur is a traditional
family owned business. This informal cluster has
always remained a high processing center mostly
catering to the needs of local, low priced bracket
footwear manufacturers
 Rivalry
 Research proved that there is minimal
domestic rivalry among the tanneries
in Pakistan each tannery is working in
isolation and the actions of the rivals
does not have any direct affect on
it, as mostly the big industry players
are export-oriented

 So in order to brew competition and

innovation we need to propel a
competitive environment in the local
arena.
 Strategy
 Lately, the leather industry has
engaged in various fairs domestically
and internationally in order to
increase awareness of leather products
among the masses
 Pakistan Pavilions was organized by
Pakistan Tanners Association in
collaboration with the EPB.
 The government of Pakistan gives
50% government subsidy in various
international fairs and exhibitions held
at different destinations in the world
 Some of the fairs in which Pakistan tanners
participated are mentioned below:

 Lineapelle Úair held in October 2005, at Bologna, Italy.

 IDÚ Leather Úair, held in January 2006, at Istanbul, Turkey.
 MMT Section of APLÚ, held in March 2006, at Hong
Kong.
 All China leather exhibition, held in September 2006, at
Shanghai.
 Le Cuir, held in September 2006, at Paris
 The government of Pakistan assigned a task of
Comprehensive development Strategy for the sector.
 The entities that are involved in this venture are
SMEDA
Ministry of industries
Production & special initiatives
 The aim of this strategic step, is to reposition the
leather industry on the domestic, regional and the
internationla front.
 The leather vision and strategy also includes the goal
of setting up leather parks in Sialkot.
 SMEDA has initiated the project of IIN( industry
information Network)
 The goal is to provide a common platform which
will stimulate coordination among the members.
Government
 The government of Pakistan is not providing the
Leather industry with channelized and adequate
support.

 Repeated efforts have been made by the Pakistan

Tanners Association to let the government know of
their problems however they haven't yet achieved
anything worth mentioning.

 EPB has helped the leather industry by providing easy

access in international fairs and is also offering
subsidies from 50%-75%
 The article published in business recorder on the 28th December
2008, mentions that government of India and China are taken various
measures such as Indian government has injected Rs.9130 million to save
its leather industry.
 þ
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 The Pakistani government should also provide the much
needed financial support (as proposed by Pakistan
Tanners Association, the provision of 25% financial costs
for setting up design centers and individual units).

 Another outcry by the tanners was over the high cost

and unwarranted supply of utilities (electricity, water and
gas).

 Even the logistic support is in a very poor situation.

 There have been many unchannelized haphazard

activities by the government to promote the leather
industry of Pakistan
 The government needs to take great strides in order to
improve the image of Pakistani products.

 Úurthermore, as we read in the dairy sector, the

smuggling and exporting of live animals is
disadvantageous for the Leather Industry. The
Government needs to look into this matter.
 Export rebates of upto 23% were given uptil 10 years
ago, which has now been reduced to a meager 0.8 to
1% for finished goods, 0.22% for apparels, 1.76%
for gloves and 2% for footwear.

 This reduces our ability to compete with countries

giving high export rebates.

 Úor example, Indian and Chinese Leather exporters

receive around 7 to 11% export rebates for finished
goods, where as the Bangladesh exporters get 15%
rebates.
Impact of WTO on Leather Industry
 Some of leather products from Pakistan especially leather
jackets are much in demand but under the foreign
renowned brand names, e.g Zara·s, Marks and
Spencer, and NEXT.

 Under WTO, no import tariffs are applied to raw hides

and skins in Pakistan at present. However, there are
varying levels of tariffs on processed goods.

 A major debate is about whether or not unfinished leather

should be exported or not, as a restriction in this case
would give the leather garment industry a stronger edge
over the leather tanners.1
 A major dispute with WTO concerning Pakistan·s
leather industry is the export restrictions on hides and
skins which were initiated by the European
communities.

 Despite the fact that Pakistan removed the restrictions

on the export of hides and skins, WTO is still
seriously concerned about the matter and it is still a
dispute.1
 Lack of Infrastructure:
± The industry is a water based industry, yet there is
extreme water shortage that tanneries have to face.
± There is an unwarranted supply of electricity, which
disrupts the production process.
± Road networks are in a very bad shape, where all
that is available are the ´Katchaµ roads.
± The drainage system is also in a very poor
condition.The drains carrying the industrial waste are
not covered.
 †Availability of quality Raw material
†raw material is not good enough to meet the needs of
the international buyers
† 80-85% tanneries import their raw material.
†NewZeland
†Sudan
†Spain
†Europe
†Animals in Sindh become victims of the wobble fly
disease and skin rashes.
 Demand conditions:
The local production is not reflective of international
demand.
Internationally there is a huge demand for footwear.
Pakistan is not at all competent in this arena and
accounts for 0.1% share of global footwear market.


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 Increasing global market competition:
Pakistan·s Leather industry accounts for 1% of the total world share of Leather.
While countries like Bangladesh which entered this industry after Pakistan, is grabbing around 2-3% of the global
market share.
 Lack of R&D and workforce training.
We do have numerous institutes for leather based technology, yet they have not been performing up to the
standards.
Moreover the general perception, shared by tannery owners is that their workforce is good enough. This
needs to be changed and employees must be encouraged to take the courses offered by institutes like NILT
Gaps in the qualities of local supplies

± This is reflected in the inefficiency of the local

machinery and dyes manufacturers.
± Our local machinery and dye manufacturers are not
competent enough, forcing tannery owners to
import all the machines ands the chemicals.
± Empirical research shows that 80% dyes used are
imported.
Poor coordination among the cluster-players
± The clusters in Kasur, Sialkot and Karachi are the
most important. Yet there isn·t a concerted effort
taking place to turnaround things for the sector.
± There isnt a shortage of institutes
ß NILT
ß Leather products development ( LPDI)
ß Institute of leather technology(ILT)
± But there is a need of unanimity of effort.
Cumbersome regulatory procedures

± Export rebates of upto 23% were given uptil 10

years ago, which has now been reduced to a meager
0.8 to 1% for finished goods, 0.22% for
apparels, 1.76% for gloves and 2% for footwear.

± This reduces our ability to compete with countries

giving high export rebates.

± Over and above this, the Pakistan Leather Industry is

subject to high L/C Margin approximating to 35%.
Lack of intercompany competition/rivalry

 Lack of awareness in the local arena

 Red tape and bureaucracy
± There are 32 departments in the government to
look after the industries
± Unfortunately all that they is to hinder the growth
of the industry rather than support it.
Brand Pakistan
± The biggest impediment in the way of the
industry, has been Pakistan·s image in the
international arena
 Coordination between the relevant training institutes across
Pakistan.

 Management of the training institute facilities is not

proactively focused to meet the needs of the industry.

 Workforce development should be high on the list of strategic

interventions to be made within the leather industry due to
the challenge that they face in maintaining a workforce that
has the skills and qualities required for the sector to remain
competitive.

 Product development in the Leather industry is majorly

required. The tanneries in Pakistan should improve upon their
product lines through R&D and innovation.

 These days, people have become more aware of the
hazards caused by these industries to human as well as
animal life, therefore proper testing process of the
chemicals produced locally should be done.

 Increase awareness about the courses offered by NILT in

conjunction with the Northampton University.

 As the Leather industry has affiliation with the

PIÚD, there should be linkages with other universities and
institutes as well.

 The initiatives to make leather parks at Sialkot, Kasur and

Charsadda should be taken seriously and proper work
should be done upon them.
 The strategy focuses on the need for the Pakistan leather
industry to brand itself in the international market.
´Leather Pakistanµ should be presented as a brand
through marketing initiatives.

 Major trade shows, fairs and other promotional activities

should be used to build our name, and thus improving
the position of ´Brand Pakistanµ.

 E-marketing- the use of the internet in order to make

people more aware of leather industry in Pakistan

 Provide investment incentives

± Higher duty drawback / tax rebate
± 6% R&D subsidy
 Sustainable Pakistan leather sector competitiveness requires
greater concentration on fashion and design

 Government of Pakistan should support the establishment

of a renowned and reputed international lab for leather
and leather products to engage in R&D.

 The industry has some excellent clients in the US and

Europe and building on these with a marketing
campaign, perhaps allied with warehousing assistance, there
is potential for Pakistan to compete for clients with
countries like Turkey who deal in a generally higher price
bracket.

 The focus on production of products specifically for the

motorcycle industry by Sialkot producers is a good example
of a specialty that can be promoted worldwide to draw
positive buyer attention to Pakistan.
 Commercialization of livestock farming to make the
standard of breeding practices better.

 The people at the slaughter houses who skin the

animal, should be made more aware of the use of those
hides and skins and how a little cut on the skin can make
the whole skin useless.

 Utilize the skin of aquatic animals, such as the sting ray

fish and the white sharks, as well as crocodiles and
alligators

 More emphasis on the foot wear

 Differentiate products in terms design

 According to Porter's diamond model, domestic rivalry is
healthy but if Pakistan is not very capable of that, the
firms in the industry should atleast try to collaborate and
thus contribute global competitiveness together.

 The cost of production is also very high in Pakistan as

compared to our competitors like China, India and
Bangladesh. This is mainly due to the utilities, import
costs and taxes, so Pakistan can work on that to capture
its lost market