Compliance failure can jeopardise RMG sector: WB
‘Exports can grow even faster if bottlenecks are addressed’
Reported on: July 04, 2012 16:38 PM
Reported in: National
Dhaka, July 4 (UNB) - Bangladesh needs to improve its trade logistics and infrastructure, more skilled manpower, and ensure compliance with the government’s labor standards to accelerate exports growth, said a new World Bank report.
Stressing the compliance, the report said compliance failures can jeopardise the entire garment sector. “Compliance important because of potential negative externality…it is increasingly important for Bangladesh.”
The report, released on Wednesday, highlighted improving administrative efficiency of Chittagong Port, giving priority to container trains and increasing the capacity of Benapole land port by building new infrastructures to consolidate and accelerate exports.
On efficiency, it said lack of skills is becoming a key constraint to growth in exports and this gap will become more acute as Bangladesh moves into producing higher-value garments.
In export of basic garments, Bangladesh’s strength will continue to be important in the near and medium-term, the report, titled ‘Consolidating and Accelerating Exports in Bangladesh’, said.
However, accelerating overall exports will require not only consolidating the existing strength in basic garments but gradually diversifying into higher-value garments as well as other exports, according to the report.
“Policymakers need to think about that turning point…encouraging diversification will help guard against shocks and sustain export growth in the long run,” the report mentioned in its ‘key messages’ area.
Lead Country Economist for the World Bank, Bangladesh and coauthor of the report Sanjay Kathuria and Task Team Leader Abul Basher jointly presented the summary findings of the report at a function at the WB office in the city.
Executive Director of Centre for Policy Dialogue (CPD) Prof Mustafizur Rahman, Executive Director of Policy Research Institute of Bangladesh Dr Ahsan H Mansur and entrepreneurs, bankers and government officials made observation on the report at the programme held with Chairman of Institute of Microfinance and Economic Research Group Dr Wahiduddin Mahmud in the chair.
The report focuses on improvement in trade logistics, skill development and compliance with labour standards that would support consolidating the existing strength in export and moving to higher value products.
The report also examines the 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 the existing areas of strength,” said Sanjay Kathuria.
He said there is a lot of scope in labour intensive manufacturing market in Bangladesh. “Demography of Bangladesh is the most important advantage.”
“Consumers who buy Bangladesh products are becoming more discerning about their buying decisions,” said M Abul Basher, economist, World
Bank Bangladesh and coauthor 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 said the 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 an 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.
Apart from this, 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.
The report also suggests that Bangladesh can do more to promote the growth of the IT-enabled services sector in Bangladesh.
Creating an apex organisation to represent the sector could greatly help improve its prospects. Attracting even one or two anchor investors in the sector can provide very significant positive spillover effects for Bangladesh.