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Thursday, August 15, 2019

Don't let the leather sector destroy

WHOLESALERS and merchants have welcomed the government decision to export rawhides with the hope that they will not have to depend only on the tanners to sell rawhide. The decision will threaten the leather, leather products, and footwear industry as rawhide export will make the raw material less available in the domestic markets, fear those involved with the trade.
The prices of rawhide people get for cattle slaughtered on Eid-ul-Azha are "not reasonable" and the latest government decision aims to ensure that they get the fair price, Commerce Minister said. Wholesalers buy the rawhide of sacrificial animals from seasonal traders and sell these to tanners. The government set the price of rawhide this year after a meeting with representatives from the traders and tanners. Seasonal rawhide traders and tanners blamed a 'syndicate' as price of cow rawhide began to drop on the evening of Eid, on Monday.
The seasonal traders in Dinajpur, the rawhide trade hub of the north, and Chattogram abandoned thousands of rawhides after being offered meager prices. The merchants blame the tanners for past dues whereas the tanners blame the merchants for forming a syndicate to cheat the seasonal traders.
Whatever the reality, the decision to export comes too late for the seasonal traders as they have already sold or dumped their stocks. In the future the government must set up cold storage facilities for hides to enable the seasonal traders to buy and sell within a reasonable time frame to avoid losses. The rawhides wholesale merchants will be perhaps the only winners here as they will no longer have to deal with only the tanneries as the hides market will no longer be a monopsony. In a monopsony situation there is only a single buyer of goods in the market--as is the case in Bangladesh as the tanneries are the sole buyer of goods.
In such a situation anyone selling must accept the market price set by the tanners. But opening the market to trade will increase competition as the wholesalers can sell to any nation willing to buy hides. If the international market prices are above the prices in Bangladesh then the wholesalers will benefit and thus can afford to pay the small traders --provided that they want to do so, of course.