KARACHI: Pakistan’s leather industry, one of the country’s signature export sectors, is losing ground even as it pulls in hundreds of millions of dollars a year and employs roughly half a million workers, according to a policy note released by the Institute of Cost and Management Accountants of Pakistan.
The report, issued by ICMA’s Research and Publications Department, found that leather exports have fallen sharply from their peak, even as global buyers demand stricter environmental and labor compliance and shipping costs climb.
Leather exports, including raw hides and finished goods, totaled about $804 million in 2025, down from a peak of roughly $1.29 billion in 2014, the report said.
The sector’s share of Pakistan’s total exports has slipped from more than 6% in 2005 to just 2.6% last year.
Monthly figures show the strain: Central bank data cited in the report show leather exports dropped to $68 million in February from $73.8 million in January, a decline the report attributes to rising costs and compliance hurdles rather than falling demand alone.
The report draws a distinction between two parts of the industry that are moving in opposite directions. Exports of raw hides and skins have collapsed, falling from $317.7 million in 2006 to $135.9 million in 2025.
Finished leather goods including apparel, bags, footwear and similar items have held up far better, at $668.1 million last year, essentially flat compared with two decades ago.
The report concludes that Pakistan’s competitive advantage lies in finished products, not raw material, and that failing to invest in processing capacity risks squandering that edge.
Much of the raw material passes through the country in a matter of days each year during Eid al-Adha, the Muslim festival that involves the ritual slaughter of livestock. This year, the report says, roughly 7.47 million animals were sacrificed nationwide, generating hides and skins worth an estimated 8.67 billion rupees.
But the report says poor handling including delayed salting, inadequate storage and weak transportation combined with informal, untraceable collection networks means a significant share of that material never reaches formal tanneries in usable condition.
The note also points to a mix of global and domestic pressures squeezing exporters. Rerouted shipping following disruptions near the Red Sea has lengthened delivery times and raised freight costs, the report says, while Brent crude oil prices climbed from about $72 a barrel in January to more than $124 in April, pushing up energy and transport costs across the supply chain.
Domestically, the report cites persistently high inflation, elevated borrowing costs tied to the State Bank of Pakistan’s policy rate, and delays in sales tax refunds and duty drawback payments as further strains on exporters’ cash flow.
To reverse the decline, ICMA proposes a two-track roadmap. In the near term, the group calls for a national hide preservation campaign timed to Eid al-Adha, faster clearance of tax refunds, targeted relief on imported tanning chemicals and machinery, and a single government facilitation desk to cut through overlapping regulations.
Longer term, the report recommends building a formal, traceable supply chain linking slaughterhouses, collectors, tanneries and exporters; establishing “green” leather clusters with shared wastewater treatment; and pushing into new markets in the Gulf, East Asia and non-traditional European destinations to reduce reliance on the United States, United Kingdom and a handful of European buyers that currently dominate Pakistan’s leather export markets.
The report points to Vietnam, Bangladesh, Turkey and several developed economies as models, noting that countries which formalized hide collection and tied trade agreements to export growth fared better than those that did not.
“This is not a problem of resources but of execution,” the report concludes, arguing that Pakistan has the livestock base, workforce and manufacturing capacity to compete globally but lacks the coordinated policy execution to convert that potential into export earnings.
