Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Rationale of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Definition and Objectives of the Study . . . . . . . . . . . . . . . . . . . 4
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 Conceptual Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Global Commodity Chains, Global Value Chains
and Global Production Networks . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 The Role of Middlemen/Intermediaries in Global
Value Chains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Subcontracting in Global Value Chains. . . . . . . . . . . . . . . . . . 16
2.4 Reconceptualising Informality . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5 Upgrading in Global Value Chains. . . . . . . . . . . . . . . . . . . . . 22
2.6 Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1 Study Site and Research Methods . . . . . . . . . . . . . . . . . . . . . 35
3.2 Limitations of This Study . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4 The Leather Industry in Bangladesh . . . . . . . . . . . . . . . . . . . . . . 43
4.1 Historical Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.2 The Organisation of the Leather Industry . . . . . . . . . . . . . . . . 45
4.3 The Institutional Framework . . . . . . . . . . . . . . . . . . . . . . . . . 46
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5 The Leather Value Chain in Bangladesh—Results
of a Qualitative Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1 The Organisation of the Leather Value Chain—Dominant
Actors and Product Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2 The Leather Processing Subsector . . . . . . . . . . . . . . . . . . . . . 52
5.2.1 Organisation of the Leather Processing
Subsector—Dominant Actors and Product Flows . . . . . . 54
5.2.2 Coordination Between Leather Processors
and Raw Hides and Skins Traders . . . . . . . . . . . . . . . . 59
5.2.2.1 The Procurement of Raw Hides
and Skins in Low Season. . . . . . . . . . . . . . . 59
5.2.2.2 Reverse Power Asymmetries in the
Procurement of Raw Material—The Role
of Intermediaries . . . . . . . . . . . . . . . . . . . . . 62
5.2.2.3 The Modified Leather Supply Chain
on the Festival of Sacrifice (Eid-ul-Azha). . . . 66
5.2.2.4 Concluding Remarks on the Coordination
of the Tannery-Trader Linkage . . . . . . . . . . . 78
5.2.3 Coordination Between Leather Processors
and (Foreign) Buyers . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.2.3.1 Domestic Market Activities . . . . . . . . . . . . . 79
5.2.3.2 Access to the International Market . . . . . . . . 80
5.2.3.3 Informal Practices and Strategies in Global
Market Entry—Analysis of Three Areas
of Global Impact. . . . . . . . . . . . . . . . . . . . . 86
5.2.3.4 Concluding Remarks on the Coordination
Between Tanners and Foreign Buyers . . . . . . 96
5.2.4 Strategies to Improve the Competitiveness
of Bangladesh’s Leather Processing Sector . . . . . . . . . . 97
5.2.4.1 Public Local Governance: Macroeconomic
Development Strategies and Policies . . . . . . . 97
5.2.4.2 Private Governance: Process Upgrading . . . . . 100
5.2.4.3 Private Governance: Product Upgrading . . . . . 134
5.2.4.4 Private Governance: Functional Upgrading . . . 141
5.2.4.5 Prospects of Inter-sectoral
Upgrading—Combining Leather Processing
and Manufacturing . . . . . . . . . . . . . . . . . . . 151
5.2.4.6 Public–Private Governance: Site
Upgrading—Relocation to the New Tannery
Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
5.2.4.7 Upgrading and Informal Dynamics
in the Tanning Industry . . . . . . . . . . . . . . . . 159
5.2.4.8 Concluding Remarks on Scope and Focus
of Upgrading Strategies for Hazaribagh’s
Tanning Industry. . . . . . . . . . . . . . . . . . . . . 161
5.3 The Leather Goods and Leather Footwear Subsector . . . . . . . . 166
5.3.1 Organisation of the Leather Goods and Footwear
Subsector—Dominant Actors and Product Flows . . . . . . 166
5.3.2 Coordination Between Leather Goods/Footwear
Manufacturers and Leather Suppliers . . . . . . . . . . . . . . 173
5.3.3 Coordination Between Leather Goods and Footwear
Producers and Customers on the Domestic Market. . . . . 177
5.3.3.1 Coordination Between MSMEs
and Wholesalers . . . . . . . . . . . . . . . . . . . . . 177
5.3.3.2 Coordination Between MSMEs and Large
Domestic Companies . . . . . . . . . . . . . . . . . . 178
5.3.3.3 Coordination Between Lead Firms
and First-Tier Suppliers on the Domestic
Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
5.3.3.4 Coordination of Subcontracting Relationships
Among MSMEs . . . . . . . . . . . . . . . . . . . . . 199
5.3.3.5 Concluding Remarks on the Coordination
of the Leather Goods and Footwear
Subsector . . . . . . . . . . . . . . . . . . . . . . . . . . 206
5.3.4 Integration of Micro, Small and Medium-Sized
Leather Goods and Footwear Manufacturers
in the Global Market . . . . . . . . . . . . . . . . . . . . . . . . . 207
5.3.4.1 Coordination of Producer-Foreign
Buyer Linkage . . . . . . . . . . . . . . . . . . . . . . 208
5.3.4.2 Constraints to Market Integration:
Low Competences in the Supply Base . . . . . . 212
5.3.4.3 Strategies to Adapt to Constraints
in Market Integration . . . . . . . . . . . . . . . . . . 219
5.3.4.4 Concluding Remarks on the Coordination
of Foreign Buyers and Leather Goods
and Footwear Manufacturers. . . . . . . . . . . . . 221
5.3.5 Upgrading in the Leather Goods and Footwear
Manufacturing Industry . . . . . . . . . . . . . . . . . . . . . . . 221
5.3.5.1 Learning from Local Large Manufacturers . . . 222
5.3.5.2 Learning from Foreign Buyers . . . . . . . . . . . 235
5.3.5.3 Learning from External Development
Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
5.3.5.4 Concluding Remarks on Upgrading . . . . . . . . 248
5.4 Discussion of the Results in View of the Conceptual
Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
6 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
Abbreviations and Acronyms
BCSIC Bangladesh Cottage and Small Industries Corporation
BFLLFEA Bangladesh Finished Leather, Leather goods and Footwear
Exporters Association
BHSMA Bangladesh Hide and Skin Merchants Association
BLSC Bangladesh Leather Service Centre
BOI Board of Investment
BPC Business Promotion Council
BSCI Business Social Compliance Initiative
BTA Bangladesh Tannery Association
CETP Central Effluent Treatment Plant
CF Cost and Freight
COD Chemical Oxygen Demand
COEL Center of Excellence for Leather Skill Bangladesh Limited
CSR Corporate Social Responsibility
DA Documents against Acceptance
DCCI Dhaka Chamber of Commerce and Industry
DLS Department of Livestock Services
DE Department of Environment
EC European Commission
EPA Environmental Protection Agency
EPB Export Promotion Bureau
EPZ Export Processing Zone
ETI Ethical Trading Initiative
EU European Union
FAO Food and Agriculture Organization of the United Nations
FDI Foreign Direct Investment
FOB Freight on Board
GCC Global Commodity Chain
GPN Global Production Network
GVC Global Value Chain
ILO International Labour Organization
ISO International Organization for Standardization
ITC International Trade Centre
LC Letter of Credit
LFMEAB Leather Goods and Footwear Manufacturers and Exporters
Association of Bangladesh
LGF Leather goods and footwear
LSBPC Leather Sector Business Promotion Council
LTSE Leather Technologist SME Entrepreneurs
MDG Millennium Development Goals
MSM Micro-, Small-, and Medium-sized
MSME Micro-, Small-, and Medium-sized Enterprises
NBR National Board of Revenue
NGO Non-governmental Organisation
NIE New Institutional Economics
OHS Occupational Health and Safety
PRICE Poverty Reduction by Increasing the Competitiveness of
Enterprises
RHS Raw hides and skins
SCPR Social Compliance and Producer relations
SEHD Society for Environment and Human Development
SME Small- and Medium-sized Enterprises
TT Telegraphic Transfer
UN-DESA United Nations, Department of Economic and Social Affairs
UNDP United Nations Development Programme
UNIDO United Nations Industrial Development Organization
USAID United States Agency for International Development
US CPSC United States Consumer Product Safety Commission
WFTO World Fair Trade Organization