Shoe City set to reshape Bangladesh's footwear industry

Despite its potential, Bangladesh's leather product exports, including footwear, have stagnated at around $1 billion for nearly two decades, while Vietnam's footwear exports have skyrocketed from less than $1 billion to an impressive $25 billion. This stark contrast highlights the challenges hindering Bangladesh's leather industry from achieving its full potential.

A significant factor contributing to Bangladesh's export stagnation is its overreliance on imported materials for footwear production. This dependence has rendered the industry vulnerable to supply chain disruptions and exchange rate fluctuations, as industry insiders have pointed out.

In a bold move set to revolutionise the footwear industry, Bangladesh Shoe City Ltd (BSCL) emerges as a beacon of innovation and progress. This groundbreaking initiative, spearheaded by the visionary Jennys Group, consolidates the manufacturing of approximately 50 critical components for shoe production within a single, state-of-the-art facility. 

Strategically positioned on a sprawling 35-acre plot in Mouchak union of Gazipur, BSCL stands poised to transform Bangladesh's position as a global footwear manufacturing hub.

With four factories, including one from Canada, already in operation, BSCL's momentum is undeniable. The project's allure has attracted the attention of 15 additional investors from diverse nations, including Japan and China, who are eager to join the venture.

Nasir Khan, chairman of BSCL, a subsidiary of the Jennys Group, reiterated the organisation's unwavering commitment to achieving 100% value addition within its state-of-the-art facility. 

Acknowledging the setbacks caused by the pandemic and the ongoing Russia-Ukraine conflict, Khan emphasised the importance of self-sufficiency in the footwear industry.

Highlighting the challenges posed by an overreliance on imported materials, he said buyers often express concerns about the stability of supply chains heavily dependent on imports, underscoring the need for a more resilient and integrated approach.

To address these concerns and establish a robust footwear manufacturing ecosystem, BSCL has undertaken a comprehensive project to establish end-to-end infrastructure within its facility. This holistic approach encompasses the production of both raw materials and finished products, all conveniently located within a single, strategically positioned complex, he added.

Sonjoy Saha, project director of BSCL, envisions the company as a one-stop shop for footwear manufacturing, with an estimated cost of Tk800 crore. Anticipating the commencement of production by all companies by 2030, the project aims to generate around 25,000 new jobs upon completion.

Saha said currently, necessary equipment for shoe production is being imported from various countries, including China and India. Typically, around 50 items are required for shoe manufacturing, and importing these items can be a time-consuming process.

In an effort to streamline the process, Saha said foreign buyers often open Letters of Credit (LCs) for 40 to 50 days. Ordering products from China and awaiting their arrival takes time, leading production units in the region to meet the demand of local factories. 

"Our initiative is expected to enhance efficiency, allowing production units in the area to fulfil the demand of both local and international markets. The goal is to have 28 establishments producing a variety of products," Saha said.

Saha emphasises that BSCL will not lease land but will provide leased buildings, with terms ranging from five to 15 years, tailored to the investor's needs. The aim is to facilitate an easy setup for production, where companies can focus on manufacturing products with the provided infrastructure.

Shoe City has a comprehensive plan for the diverse range of footwear and accessories that will be manufactured within its facility. These include leather shoes, sports shoes, jute or espadrilles shoes, safety shoes, children's shoes, ladies' fashion shoes, canvas shoes, school shoes, rubber shoes, Goodyear welted shoes, gags, wallets, and belts.

Shoe City will also foster the development of ancillary industries dedicated to producing essential footwear components, including outsoles, rubber, crepe, adhesives, synthetic materials, boxes, cartons, printing, labelling, tags, threads, moulds, dyes, toe puffs, counters, and tapes.

Shoe City said by using a shared services model, factories will be able to pool their resources together for the functions in the existing value chain to run cost-effective manufacturing operations. 

The gap between manufacturers and suppliers will be mitigated as all the back-linkage industries will be located in one central location.  By our estimates, the production cost of member factories will go down by 20 %, making their products very competitive in the world market, Sonjoy Saha said.

The project commenced in 2017 and has transformed the entire landscape, readying it for the establishment of factories. A new five-story building having over one lakh square feet is under construction. Five companies have already initiated production, and we have secured memorandums of understanding (MOUs) with an additional 15 companies from Europe, China, and Japan. These partnerships will facilitate the manufacturing of various shoe-making components, Saha said.

Shoe City moving forward despite challenges

"We are facing many challenges after the pandemic. The global economic crisis triggered by the Russia-Ukraine war has also impacted us. Foreign companies that have expressed interest in setting up factories here are taking their time due to these uncertainties, including the upcoming Bangladesh national election. However, we are hopeful that several companies will commence production here by 2024," Saha said.

He said buyers in developed countries are emphasising transparent and sustainable supply chains. To meet these demands, foreign buyers are enforcing strict compliance standards across all organisations. They are particularly checking whether establishments possess Leather Working Group (LWG) certification.

"We are moving forward with our plans. Our Effluent Treatment Plant (ETP) is nearly 90% complete. We will provide ETP connections to any tannery or company that requires them. We will also establish a Green Resilience Zone, which will facilitate the acquisition of Leather Working Group (LWG) certification from the institute here. Additionally, we will maintain Renewable Energy Solutions," Saha added.

Companies in production now

Five-R Footwear Ltd: A full-fledged leather footwear manufacturing company producing approximately 2,000 pairs of leather footwear daily. The company encompasses a leather finishing tannery with a capacity of 20,000 square feet per day and a sole manufacturing unit capable of producing 3,000 pairs per day. Five-R Footwear boasts an on-site bonded warehouse and an operational ETP that effectively decomposes various types of waste.

In addition, an Indian company is now manufacturing leather elastic, a Portuguese company is manufacturing shoe oil and a Canadian company is engaged in producing souvenir products incorporating cloth and leather.

"In addition to footwear manufacturing, we have also opened up our facility for garment production. This facility will specifically cater to manufacturers of leather-based souvenir items, such as handbags and gloves," Saha said.

In addition to the state-of-the-art manufacturing facilities, the leather industrial park will boast an array of comprehensive central facilities designed to cater to the needs of its occupants and foster a vibrant and well-rounded work environment. 

These facilities include a training centre, restaurants, a childcare centre, a medical centre, a library, prayer rooms, a central administrative building, a central display sales centre, a central inspection centre, tasting laboratories, a central bonded warehouse, a fire station, a logistic and transportation company, a central security system company, accommodations hotel, grocery shops, and a central wastage management.

Sonjoy Saha said, "We are ready to provide all facilities including utilities [gas and electricity] to investors. We have constructed a rainwater reservoir and even a helipad. The government is giving us the necessary support."

Bangladesh has set a target of $10 billion in leather product exports by 2030. Currently, about $1.7 billion in leather products are exported annually. Sonjoy Saha hopes that Shoe City will help the country meet the export target.