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Exports can grow even faster, provided critical bottlenecks are addressed, says new World Bank report

July 4, 2012

DHAKA: Bangladesh needs to improve its trade logistics and infrastructure, add more skilled manpower, and ensure compliance with the government’s labor standards to accelerate growth of exports, says a new World Bank report “Consolidating and Accelerating Exports in Bangladesh.”

According to the report, exports of basic garments, Bangladesh’s strength, will continue to be important in the near and medium-term. However, accelerating overall exports will require not only consolidating existing strengths in basic garments but gradually diversifying into higher-value garments as well as other exports.

The report focuses on improvements in trade logistics, skill development and compliance with labor standards that would support consolidating existing strengths in exports and moving to higher value products. The report also examines prospects for diversifying into IT-enabled services, a sector that is growing fast worldwide and can provide high-quality jobs.

“Bangladesh’s current cost advantage in the garment sector may not be adequate to compete globally as the country moves up the value chain. The country must improve logistics to ensure that exports as well as imported inputs are shipped on time, cost effectively and reliably, and this is important to even ensure sustained growth in existing areas of strength,” said Sanjay Kathuria, lead country economist for World Bank Bangladesh and co-author of the report.

Improving customs procedures, enhancing air shipment capacity, and improving rail services would be crucial to improve the trade logistics of the country.

The skills gap is becoming increasingly visible, even in the garment industry. A high turnover rate is one evidence of this. As the main vehicle for training workers, the publicly-funded Technical and Vocational Education and Training program needs to increase its relevance to better meet the needs of garments and other sectors. This apart from more innovative ways to improve skills, such as trainee-targeted training vouchers, need to be thought of. As Bangladesh moves towards higher value garment exports, it becomes even more important to enforce compliance with labor standards.

Compliance with its own labor and building standards will become increasingly more important for Bangladesh’s garment exports. “Consumers who buy Bangladesh’s products are becoming more discerning about their buying decisions,” said Md. Abul Basher, Economist, World Bank Bangladesh and co-author of the report. “The Government will need to work closely with the industry to ensure that its labor standards are properly implemented, and also support firms to relocate factories from residential to industrial buildings that are better equipped to provide safe working conditions.”

The report also suggests that Bangladesh can do more to promote the growth of the IT-enabled services sector in Bangladesh. Creating an apex organization to represent the sector could greatly help improve sector prospects. Attracting even one or two anchor investors in the sector can provide very significant positive spillover effects for Bangladesh.

The report was launched today at the World Bank Dhaka Office. The event was chaired by Prof. Wahiduddin Mahmud, Chairman, Economic Research Group.

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